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B 


USINESS 

FOR 


Law 




BUSINESS 


MEN 


A Re 


"erence Book Showing the 


Laws of California for 




Daily Use in Business Affairs 




THIRD EDITION 




4^ ' 

By A. J. BLEDSOE 


Member 
1893 


of Legislature of California from Hum 
, 1S95 — Successor to Law Firm of McGa 


boldt County, Sessions of 1891 
vey & Bledsoe, Ukiah, Cal. 




PRINTED FOR THE AtTHOR BY 

R. S. KITCHENER, 954-956 Clay Street 
Oakland, California 




1904 





;^* 



TME H8«AWV OF 

OONQRESS. 
ONr Omr ReoavEO 

AUG. S^ t904 




Qoyy 8. 



Copyright, 1904 






e^ 



A. J. BLEDSOE 



INTRODUCTION 

My experience and observation during a busy life in the 
practice of law have served to demonstrate to me that much 
vexatious and expensive controversy, arising from a lack 
of knowledge of the laws of the State on matters of every- 
day business, might be avoided, if business men had the 
means of ascertaining at the moment wdiat their rights and 
liabilities would be. 

Men usually go to a lawyer after a controversy has oc- 
curred, and seek a lawyer's advice, not to keep out of 
trouble, but to be extricated from it. The plan of this 
work is to so arrange and illustrate the laws of California 
pertaining to ordinary business affairs, and rights and obli- 
gations in many relations of life, that a busy man can turn 
immediately to the page and section and find the infor- 
mation he needs, before assuming a liability himself or 
attempting to enforce a right against others. 



WHAT SUPREME COURT JUDGES SAY 



JUDGE WALTER VAN DYKE. 

State of California, 
Judicial Department Supreme Court, 
Chambers of Associate Justice Walter Van Dyke, 

San Francisco. 
A. J. Bledsoe, Esq., Attorney at Law, 

L^kiah, Cal., 
Dear Sir: — 

I have received a -copy of your book entitled "Business 
Law for Business ]\Ien," and you will please accept my 
thanks for the same. The book contains the code law of 
the State, conveniently arranged, bearing upon the most im- 
portant subjects pertaining to business affairs, and cannot 
fail to be of great service to business men, for whose benefit 

(iii) 



IV WHAT SUPREME COURT JUDGES SAY. 

it appears to have been specially intended, but will also 
prove to be very convenient and useful to the practicing 
lawyer. Very truly yours, 

WALTER VAN DYKE. 



JUDGE F. M. ANGELLOTTI. 

State of California, 
Judicial Department, Supreme Court, 
Chamber of Associate Justice Frank M. Angellotti, 

San Francisco. 
A. J. Bledsoe, Esq., 
Dear Sir: — 

I appreciate your courtesy in sending me a copy of your 
book, "Business Law for Business Men," and the limited 
examination I have been able to give it satisfies me that 
it is a very creditable work, containing much useful infor- 
m.ation. Yours very truly, 

F. M. ANGELLOTTL 



JUDGE LUCIEN SHAW. 

State of California, 
Judicial Department, Supreme Court, 
Chamber of Associate Justice Lucien Shaw, 

San Francisco. 
Mr. A. J. Bledsoe, 

Ukiah, Cal., 
Dear Sir: — 

I have examined your ''Business Law for Business Men" 
with some care, and am very much pleased with it. It is 
concise, the style is clear, and the matter generally accurate 
and complete. It is the best work of the kind that I have 
seen. Yours very truly, 

LUCIEN SHAW. 



INDEX TO SUBJECTS 



PAGE 

Making of Contracts 33-44 

Agreements for Sale 44-46 

Sale of Personal Property 46-50 

Installment Sales 50-54 

Stoppage in Transit 54-56 

Warranty of Personal Property 56-58 

Auction Sales 58-60 

Deposit of Personal Property 61, 62 

Storage of Personal Property 62 

Storage in W? --ehouses 62-66 

Hotel Keepers and Lodging-house Keepers 66-74 

Landlord and Tenant 74-81 

Sale of Real Property 81-89 

Employer and Employee 89-92 

Master and Servant 92-94 

Principal and Agent 94-i03 

Wholesaler's Agents 103-108 

Manufacturer's Agents 108-1 it 

Commission Merchants 1 1 i-i 16 

Real Estate Agents 1 16-139 

Fire Insurance Contract 139-161 

Fire Insurance Agents 161-168 

Building Contracts 168-185 

Mechanic's Liens 185-20(5 

Logger's Lien 217-220 

Architects 206-212 

Liens for Salary and Wages 212, 213 

Vendor's Lien 213-215 

Liens on Personal Property 215-217 

Lien of Persons Working on Threshing-machine 220, 221 

Liens in Favor of Stallions, Jacks, and Bulls 221, 222 

Damages for Breach of Contract 222-226 

Partnership 226-252 

Surveys of Land 252-268 

Spaulding's J" able for Measurement of Logs 268-273 

Division Fences 273-300 

Rights and Liabilities of Professional Men — Physicians and 

Surgeons 300-313 

•Rights and Liabilities of Professional Men — Dentists 313, 314 

Rights and Liabilities of Professional Men — Oculists 314, 315 

Rights and Liabilities of Professional Men — Attorneys at Lav^. .315-317 
Rights and Liabilities of Professional Men — Teachers in the 

Public Schools ^ 3'^7-323 

Searchers of Record 324-328 

Notary Public 328-335 

Carriers of Freight 335-342 

Letters of Credit 342-345 

Bills of Exchange ^. 345-352 

Assignment for Benefit of Creditors 352-359 

Collection of Bills and Accounts 359-369 

(v) 



VI INDEX TO SUBJECTS. 

PAGE 

Promissory Notes 369-396 

Mortgages 396-421 

Attachments 421-429 

Judgments and Executions 429-432 

Last Wills and Testaments 432-441 

Estray Law of California 441-445 

Corporations in California 445-506 

Mines and Mining 506-549 

Water and Water Rights 549-574 



CONTENTS 



PART I 



Section 


I. 


Section 


2. 


Section 


?>■ 


Section 


4- 


Section 


5- 


Section 


6. 


Section 


7. 


Section 


8. 


Section 


Q. 


Section 


10. 


Section 


II. 


Section 


12. 


Section 


13- 


Section 


14. 


Section 


IS. 


Section 


16. 


Section 


17- 


Section 


18. 


Section 


IQ. 


Section 


20. 


Section 


21. 


Section 


22. 


Section 


22a. 


Section 


2.^ 


Section 


24. 


Section 


25- 


Section 


26 


Section 


27 


Section 


28 


Section 


2Q 


Section 


30 


Section 


31 


Sole 




Section 


31a 


Section 


31b 


Section 


3IC 



Business Contracts and Legal Obligations 

MAKING OF CONTRACTS. 



-Business Contracts 33 

-Parties to Contracts 33 

-Consent of Parties to Contract 35 

-When Consent Is Not Mutual 36 

-Proposal of Contract, Acceptance and Revocation.... 36 

-Objects of Contract 37 

-Consideration of a Contract 37 

-What Contracts May Be Verbal 38 

-What Contracts Must Be in Writing 38 

-Contracts against Public Policy 39 

-Contracts in Restraint of Trade 39 

-Sale of Good Will of a Business 40 

-Alteration of Verbal Contract 41 

-Alteration of Written Contract 41 

-Express Contracts 41 

-Implied Contracts '. . . 41 

-Termination of Contracts 42 

-Rescission of Contract 42 

-Extinction of Written Contract by Cancellation 42 

-Interpretation of Contracts 43 

-Printed and Written Parts of Contract 44 

-Time of Performance of Contract 44 

-Place of Performance 44 

AGREEMENTS FOR SALE. 

-Kinds of Agreements for Sale 44 

-Agreement to Sell Real Property '..45 

-Agreement to Sell Personal Property 45 

SALE OF PERSONAL PROPERTY. 

-When Goods Sold Must Be Delivered 46 

-Where Delivery Must Be Made 46 

-When Price of Goods Bought Must Be Paid 46 

-Right to Inspect Goods before Acceptance 47 

-Expense of Transportation 47 

-Buyer's Directions as to Manner of Sending Things 

47 

-The Bulk Law 48 

-Bill of Sale 49 

-Form of Bill of Sale 49 

(vii) 



CONTENTS. 



Section 3 id. 

Section 3ie.- 

Section 3if.- 

Section 3ig. 

Section 3ih. 

Section 3ii.- 

Section 31J.- 

Section 31k. 



Section 32. 
Section 33. 
Section 34. 



INSTALLMENT SALES. 

PAGE 

-Conditional Sales of Personal Property 50 

-Language of the Contract 50 

-Default in Payments 51 

-Sale by Vendee to Another Person 51 

-Remedy of Seller in Case of Purchaser's Default... 52 

-Money Already Paid 52 

-Absolute Sale on Installments 52 

-Form of Conditional Agreement 53 

STOPPAGE IN TRANSIT. 

-When Seller or Consignor May Stop Goods in Transit 54 

-Resale of Personal Property 55 

-What Will Defeat Vendor's Right to Stop Goods... 55 



WARRANTY OF PERSONAL PROPERTY. 



Section 
Section 
Section 



35. — Warranty of Title 56 

36. — Warranty on Sale by Sample 56 

37. — Warranty on Agreement to Sell Merchandise Not in 

Existence 57 

Section 38. — Manufacturer's Warranty against Defects 57 

39. — Warranty of Soundness 57 

40. — Warranty by Trade-marks and Other Marks 57 

41. — Warranty of Provisions for Domestic Use 58 

42. — Warranty on Sale of Good Will of Business 58 



Section 
Section 
Section 
Section 



Section 
Section 
Section 
Section 
Section 
Section 
Section 



AUCTION SALES. 

— Authority of Auctioneer ' 58 

— When Auction Sale Is Complete 59 

— Withdrawal of Bids 59 

— Auction Sale under Written Conditions 59 

— Auction Sale without Reserve 59 

— Frauds upon the Buyer 60 

— Auctioneer's Memorandum of Sale Binds Both Parties 60 

DEPOSIT OF PERSONAL PROPERTY. 



Section 50. — Deposit for Safe Keeping 61 

Section 51. — Deposit for Exchange 61 

Section 52. — Obligations of the Depositary 61 

Section 53. — Things Which Will Excuse Delivery 62 



STORAGE OF PERSONAL PROPERTY. 

Section 54. — Storage 62 

Section 55. — Care to be Taken of Thing Deposited 62 

STORAGE IN WAREHOUSES. 

Section 56. — Warehouse Receipts 62 

Section 57. — When Warehouse Receipt Is Not Negotiable 64 

Section 58. — Removal of Property by Warehouseman 64 

Section 59. — Delivery of Property by Warehouseman 64 



CONTENTS. IX 

PAGE 

Section 60. — Liability of Warehouseman 64 

Section 6t. — Warehouseman's LiabiHty for DeHvering Property to 

Wrong Person 65 

Section 62. — Warehouseman's Liability for Loss by Fire 65 

Section 63. — Sale of Property for Storage Charges 66 

HOTEL KEEPERS AND LODGING-HOUSE KEEPERS. 



Section 64. — Liability of Plotel Keepers and Lodging-house Keepers 66 

Section 65. — Exemption from Liability in Certain Cases 68 

Section 66. — What Property Must Be Deposited in the Safe 69 

Section 67. — Liability of Hotel, Boarding-house, and Lodging- 
house Keepers for Loss by Fire 70 

Section 68. — Liability of Plotel, Boarding-house, and Lodging- 
house Keepers for Loss by Theft 71 

Section 69. — Liability of Hotel, Boarding-house, and Lodging- 
house Keepers for Loss of Baggage 71 

Section 70. — Lien of Plotel, Boarding-house, and Lodging-house 
Keeper on Baggage and Other Property 72 

Section 71. — Sale of Unclaimed Baggage by Plotel, Boarding- 
house, and Lodging-house Keepers 72 

Section ^2. — Statement of Charges, etc., to be Posted by Hotel, 
Boarding-house, and Lodging-house Keepers ']2) 

Section 72a. — Defrauding Hotel Keepers ']2> 

LANDLORD AND TENANT. 

-Leases of Real Estate. 74 

-For What Term Leases May Be Made in California 74 

-When Verbal Lease May Be Made 74 

-When Lease Must Be in Writing 75 

-Form of Lease 75 

-What Repairs Lessor Must Make 76 

-When Lessee May Make Repairs JJ 

-Termination of Lease "jy 

-Renewal of Lease 78 

-Term of Hiring When No Limit Is Fixed ^. 78 

-When Rent Is Payable 79 

-Notice to Quit 79 

-How Notice'to Quit Must Be Served 80 

-Option to Purchase in Lease 80 

-Tenant Must Deliver Notice Served on Him 81 



Section 


73.- 


Section 


74- 


Section 


7S. 


Section 


76. 


Section 


77-- 


Section 


78. 


Section 


70- 


Section 


80.- 


Section 


8t.- 


Section 


82. 


Section 


83. 


Section 


84.- 


Section 


8s. 


Section 


86. 


Section 


87. 



SALE OF REAL PROPERTY. 



Section 87a. — Transfer by Deed 8t 

Section 87b. — Deed to Community Property 8t 

Section 87c. — Deed lo vSeparate Property 82 

Section 87d.— Deed of Gi ft 82 

Section '^y^. — Form of Deed of Gift 82 

Section 87! — Bargain aud Sale Deed 83 

Section 87g. — Form of Bargain and Sale Deed 84 

Section 87h. — Quitclaim Deed 85 

Section 87i. — Form of Quitclaim Deed 85 

Section 87J. — Warranty Deed 86 

Section 87k. — Form of Warranty Deed 87 

Section 87I. — Deed in Escrow 88 



Section 
Section 



87m. 



Section 88. 

Section 89. 

Section 90. 

Section 91. 



Section 92. 
Section 93. 
Section 94. 



95- 
96. 

97- 
98. 
99. 



Section 
Section 
Section 
Section 
Section 

Section 100. 

Section loi. 

Section 102. 

Section 103. 

Section 104.- 

Section 105.- 

Section 106.- 

Section 107. 

Section 108. 

Section 109. 

Section no. 



Section in. 

Section 112.- 

Section 113. 

Section 114. 

Section 115.- 

Section 116. 

Section 117. 

Section 118. 

Section 119. 

Section 120. 



Section 121. 

Section 122. 

Section 123. 

Section 124. 

Section 125. 

Section 126. 



CONTENTS. 

PAGE 

—Effect of Deed in Escrow 88 

-Deed Cannot Be Canceled 89 

EMPLOYER AND EMPLOYEE. 

-Contract of Employment 89 

-Obligations of the Employer 90 

-Obligations of the Employee 91 

-Termination of Employment 91 

MASTER AND SERVANT. 

-Who Is a Servant .y^ 92 

-Term of Hiring 93 

-When Servant May Be Discharged 93 

PRINCIPAL AND AGENT. 

-Definition of Agency 94 

-Kinds of Agency 94 

-Authority of Agent 94 

-What Included in Authority to Sell Personal Property 95 
-What Included in Authority to Sell Real Estate.... 95 
-Authority of Agent to Receive Price of Property. ... 95 

-Agent's Power to Disobey Instructions 95 

-Agent Cannot Have Authority to Defraud Principal 96 

-Agent's Actual Authority 97 

-Agent's Ostensible Authority 97 

-Ratification of Agent's Acts 99 

-How Agency Is Created 99 

-Mutual Obligations of Principal and Third Persons 99 

-Obligations of Agents to Third Persons loi 

-Agent's Delegation of His Power 102 

-Termination of Agency 102 

WHOLESALER'S AGENTS. 

-Traveling Agents 103 

-Sale by Sample 103 

-Purchaser's Right to Return Goods 103 

-Collections by Traveling Agent 104 

-Giving Credit 104 

-Declarations of Wholesaler's Agent 104 

-Notice to Wholesaler's Agent 104 

-Failure to Ship Goods 105 

-Notice by Wholesaler of Termination of Agency... 105 
-Wholesaler's Repudiation of Agency 106 

MANUFACTURER'S AGENTS. 

-Manufacturer's Agent to Buy or Sell 108 

-Agent's Authority to Borrow Money 108 

-Agent Selling Goods Out of Manufacture no 

-Selling Goods for One Year Made in Another no 

-Limitation of Authority no 

-Sale of Property When Manufactured ....in 



CONTENTS. 



COMMISSION MERCHANTS. 



Section 


127 


Section 


128 


Section 


I2Q 


Section 


130 


Section 


i.-^T 


Section 


1,^2. 


Section 


T.33. 


Section 


134 


Section 


I.3S 


Section 


1.36 


Section 


1.37 


Section 


1.38. 


Section 


I.3Q. 


Section 


140. 


Section 


141. 


Section 


142. 


Section 


14.3 


Section 


144. 


Section 


14s. 


Section 


146. 



-Selling Property on Commission iii 

-Insurance of Consigned Property iii 

-Authority to Sell on Credit 1 1 1 

-Pledge of Consigned Property 112 

-Authority of Partner or Servant 112 

-Instructions from Consignor 112 

-Cannot Extend Credit 112 

-Guaranty of Certain Price 113 

-Instructions to "Sell on Arrival" 113 

-Special Property in Consignments 113 

-In Whose Name Insurance May Be Put 114 

-Responsibility of Purchaser 114 

-Right to Commissions 114 

-May Sell in His Own Name 114 

-Taking Promissory Note in Payment 115 

-Lien of Commission Merchant 1x5 

-Authority as General Agent 115 

-Care to be Taken of Goods Consigned 115 

-Must Not Mix Goods with Another's 115 

-Duty to Render Accounts 116 

REAL ESTATE AGENTS. 

Section 147. — Employment Must Be in Writing 116 

Section 148. — Verbal Contract Invalid 116 

Section 149. — Exception Where Sale Made in Presence of Parties. 116 

Section 150. — Description of Land 117 

Section 151. — Right of Agent to Commissions When Property 

Withdrawn from Sale 117 

Section 152. — When Contract Fulfilled and Commission Earned.. 118 
Section 153. — What Is Sufficient Authority from Corporation. .. .119 
Section 154. — Ratification of Unauthorized Employment by Cor- 
poration 120 

Section 155. — Option to Agent to Sell for Commission above a 

Fixed Price 120 

Section 156. — Failure of Sale by Defective Title 122 

Section 157. — Failure of Owner to Remove Defects 123 

Section 158.— Ratifying Authority of Brokers 123 

Section 159.— What Is Good Title 124 

Section 160. — Sale by Owner 124 

Section ],6i. — Commissions upon Sale or Exchange by Owner 124 

Section 162. — Sale by Owner through Another Agent 125 

Section 163. — Misrepresentation by Owner 125 

Section 164. — What Constitutes a Sale by Owner 125 

Section 165. — Liability of Agent under Contract to Sell for Speci- 
fied Amount 126 

Section 166. — Liability of Owner to i\uctioneer 127 

Section 167. — What Agent Must Prove in Suit to Recover Com- 
missions 127 

Section 168. — Agent's Mistake as to Title 128 

Section 169. — Repudiation of Contract by Vendor 128 

Section 170. — Terms of Payment, and Refusal to Accept Tender... 129 

Section 171.— Husband Giving Agent Property of Wife to Sell 129 

Section 172. — What Constitutes Finding a Purchaser 129 



Xll CONTENTS. 

PAGE 

Section 173. — Owner and Purchaser Need Not Be Brought Face 

to Face 130 

Section 174. — Amount of Commissions 130 

Section 175. — Prevention of Sale by Owner 131 

Section 176. — When Purchaser and Owner Are Not Brought To- 
gether Purchaser Must Sign a Written Contract 131 

Section 177. — When Owner Must Return Money Paid on Contract. 133 
Section 178. — Agreement between Agents to Cooperate in Sening.134 

Section 179. — Authority to Sell on Credit 134 

Section 180. — Power of Attorney to Agent to Make Deed 134 

Section 181. — Risk of Purchaser Who Takes Lawyer's Advice as 

to Title 135 

Section 182. — Liability of Auctioneer for Deposit at Auction Sale.. 135 

Section 183. — Agent's Knowledge of Title 135 

Section 184. — Interest Allowed by Law on Agent's Commissions, .135 

Section 185. — How Authority of Agent Can Be Extended 136 

Section 186. — Costs in Suit for Commissions 136 

Section 187. — Commissions out of Purchase Money 136 

Section 188. — Selling Land on Shares 136 

Section 189. — Purchase by Agent from Himself 137 

Section 190. — Purchase by Agent from Principal 137 

vSection 191. — Agent Buying in His Own Name 137 

Section 192. — When Authority of Agent Revocable . 138 

Section 193. — Which One of Two Brokers Is Entitled to Commis- 
sions 138 

Section 194. — Authority of Agent Making Lease for Term Longer 

than One Year 138 

Section 195. — Death of Principal Revokes Authority of Agent,... 139 

FIRE INSURANCE CONTRACT. 



Section 196. 

Section 197 

Section 198 

Section 199. 

Section 200, 

Section 201 

Section 202 

Section 203 

Section 204 

Section 205 

Section 206 

Section 207 

Section 208 

Section 209 

Section 210. 

Section 211 

Section 212 

Section 213 

Section 214 

Section 215 

Section 216, 



217, 



Section 

Section 218, 

Section 219, 

Section 220, 



-Contract between the Parties 139 

-Designation of Parties 140 

-Insurable Interest 140 

-Measure of Interest in Property 141 

-When Insurable Interest Must Exist 141 

-Insurance without Interest Illegal 142 

-Wager Policies Void 143 

-Duty of Parties in Making the Contract 143 

-The Policy of Insurance 144 

-Open and Valued Policies 145 

-Running Policy 14S 

-Acknowledgment in Policy of Receipt of Premmm.145 

-Agreement Not to Transfer 146 

-Certain Warranties 146 

-What Acts Avoid Policy 146 

-Exoneration of Insurer 146 

-Notice of Loss 146 

-Preliminary Proofs of Loss . . . .* 147 

-Double Insurance 147 

-Alteration Increasing Risk ._ 148 

-Alteration Which Does Not Increase Risk 148 

-Verbal Contract to Issue Policy. 148 

-Certificate of Notary 148 

-Falsity of Material Representations by Insured 149 

-Statements as to Valuations » . 150 



CONTENTS. Xlll 

PAGE 

Section 221. — Rights of Mortgagee. — Effect of Sale under Fore- 
closure 1 50 

Section 222. — Insurance b}- Commission Merchant.— Incorrect State- 
ment as to Ownership 150 

Section 223. — Right of Arbitration 151 

Section 224. — Waiver of Proof of Loss by Arbitration 151 

Section 225. — Waiver of Condition as to Prepayment of Premium. 152 

Section 226. — Remedy for Unauthorized Term of Credit 152 

Section 227. — Insurance of Unoccupied Building 152 

Section 228. — Payment of Policy 153 

Section 229. — Condition as to Change Occurring in Building 153 

Section 230. — Rules for Interpreting Contract of Insurance 153 

Section 231.— Time When Policy Takes Effect 156 

Section 232. — Contract of Reinsurance. — Effect of Prior Loss 156 

Section 233. — Warranties 157 

Section 234. — Provision as to Bringing Suit 159 

Section 235. — Proofs of Loss to Reinsuring Company 159 

Section 236. — Liability of Heir for Premium 160 

Section 237. — Insurance on Harvester While in Use 160 

Section 23S. — Liability of Company on Policy Written but Not 

Delivered until after Fire 160 



Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 
Section 



239 
240 
241 

242 

243 

244, 

245 
246 
247 
248. 
249 
250 

251 
252 

253 

254 
255 



FIRE INSURANCE AGENTS. 

-Appointment and x^uthority of Agents i6r 

-Brokers oi" Agents 162 

-Agent Waiving Forfeiture 162 

-Authority of Local Agent 163 

-Ostensible General Power of Local Agent 164 

-Knowledge of Agent Is the Knowledge of Company. 164 

-Oral Waiver of Indorsement by Local Agent 164 

-Application Made Out by Agent of Company 165 

-Fraud of Agent. — Disobedience of Instructions 165 

-Waiver of Petroleum Clause by Agent 166 

-Waiver Continues during Renewal of Policy 166 

-Authority of Special Agent 166 

-Oral Promise of Policy 166 

-Agent's Knowledge of Former Insurance 167 

-Offer to Renew Policy 167 

-Unauthorized Contract of Local Agent 167 

-Waiver from Knowledge of Agent 168 



Section 256.- 

Section 257.- 

Section 258.- 

Section 259.- 

Section 260.- 

Section 261.- 

Section 262.- 

tion .... 

Section 263.- 

Section 264.- 

Section 265.- 

Section 266.- 



BUILDING CONTRACTS. 

-Contract Must Be in Writing 168 

-Contract or Memorandum to be Recorded 169 

-Recorder's Fee 169 

-Time of Payments 169 

-Last Payment 169 

-Contractor's Bond 170 

-Materials- Furnished Contractor Exempt from Execu- 

170 

-Form of Builder's Contract 171 

-Reference to Plans and Specifications in Contract. . .176 

-When Contract Wholly Void ; 176 

-Defects Which Will Not Make Contract Void 176 



XIV 



CONTENTS. 



PAGE 

Section 2^^. — Twenty-five Per Cent Reserved 177 

Section 268. — Building Contract Where Price Does Not Exceed 

One Thousand Dollars 177 

Section 269. — Contract of Minor 177 

Section 270. — Price Where Contractor Abandons the Work 178 

Section 271. — Owner Preventing Work 178 

Section 272. — Notice to Owner 178 

Section 273. — Acceptance by Agent 178 

Section 274. — Breach of Contract by Owner 179 

Section 275. — Agreement as to Extra Work 179 

Section 276. — Loss by Fire before Completion 179 

Section 277. — Contract Providing for Arbitration 180 

Section 278. — Suit for Reasonable Value of Work and Materials. 180 

Section 279. — Invalid Memorandum 181 

Section 280. — Substantial Performance 181 

Section 281. — Owner Not Liable for Damages on Unrecorded 

Contract 183 

Section 282. — Right of Contractor to Abandon Work 183 

Section 283. — Material Departure from Specifications 184 

Section 284. — Excavations 184 

MECHANIC'S LIENS. 

Section 285. — The Persons Entitled to Liens 185 

Section 286. — To What Lien Extends 186 

Section 287. — Advance Payments Do Not Affect Lien 186 

Section 288. — Alteration of Contract Does Not Affect Lien 187 

Section 289. — Notice to Reputed Owner 187 

Section 290. — What Interest in the Land Subject to the Lien 187 

Section 291. — Effect of Mechanic's Lien . . . .' 188 

Section 292. — Owner's Notice of Completion 188 

Section 293. — Effect of Failure to File Owner's Notice 189 

Section 294. — Fee for Recording Owner's Notice 189 

Section 295. — Time within Which Original Contractor May File 

Lien 189 

Section 296. — Time within Which Mechanic, Material-man, or La- 
borer May File Lien 189 

Section 297. — Time within Which Miner May File Lien 190 

Section 298. — Claim of Lien to be Filed in Recorder's Office 190 

Section 299. — Occupation or Use of Building Equivalent to Com- 
pletion 190 

Section 300. — Liens upon Two or More Pieces of Property 191 

Section 301. — When Suit Must Be Commenced to Foreclose Lien. 191 

Section 302. — Liens on Lots in Incorporated Cities and Towns 191 

Section 303. — Notice by Owner That He Will Not Be Responsible. 192 

Section 304. — Measure of Recovery by Contractor 192 

Section 305. — Contractor Must Defend Suits on Liens at His 

Own Expense 193 

Section 306. — Order in Which Liens Apply 193 

Section 307. — Lien May Be Waived and Personal Action Brought. 193 
Section 308. — What Is Applied to Liens When Contractor Aban- 
dons the Work 194 

Section 309. — False Claims 194 

Section 310. — Conspiracy between Owner and Contractor 194 

Section 311. — Building Constructed under Distinct Contracts. — 
Who Is Original Contractor 195 



CONTENTS. XV 

PAGE 

Section 312. — Allowance of Interest 195 

Section 313. — Allowance of Attorney's Fees 195 

Section 314. — When Lien for Materials Begins 196 

Section 315. — Partnership Claim 196 

Section 316. — When Contractor Not Entitled to Lien 196 

Section 317. — Deduction by Owner of Amount of Foreclosed Lien. 196 

Section 318. — Lien for Moving a House 197 

Section 319. — Lien on Homestead 197 

Section 320. — Notice by Material-man to Trustees of State Insti- 
tution 197 

Section 321. — Lien against Railroad 197 

Section 322. — Abandonment and New Contract 198 

Section 323. — Time of Filing Claims of Sub-contractors 198 

Section 324. — Liens on Mining Claims 198 

Section 325. — Miner's Lien Must Be upon the Whole Claim 199 

Section 326. — No Lien against a Public Building 200 

Section ^i^y. — Right of Material-man to Give Notice 201 

Section 328. — Elevator Part of Building 201 

Section 329. — Description of Mining Claim 202 

Section 330. — Dwelling-house. — Land Subject to Lien 202 

Section 331. — Contractor and Owner Cannot Take Away Material- 
man's Lien 202 

Section 332. — What Is Meant by Owner 203 

Section 2>?i2>- — Real or Reputed Owner 203 

Section 334. — Attorney's Fee Need Not Be Paid before Suit 204 

Section 335. — Duty of Owner upon Receiving Notice of Material- 
man's Claim 204 

Section 336. — Priority of Material-man's Claim over Mortgage. . .204 

Section ZZI- — Mining Ground. — Patented Land 205 

Section 338. — Appointment of Painter as Keeper 205 

Section 339. — Materials Must Be Expressly Furnished for Structure 

Charged with Lien 205 

Section 340. — Assignment of Mechanic's Lien .205 

ARCHITECTS. 

Section 341. — Compensation of Architect 206 

Section 342. — Architect's Lien 206 

Section 343. — Architect Cannot File Lien against Public Building, .206 

Section 344. — Architect Has No Lien against Monument in Public 

Park 208 

Section 345. — Payments Made on Architect's Certificate 208 

Section "346. — Architect's Certificate as to Liens 208 

Section 347. — Condition as to Certificate May Be Waived by Owner. 209 

Section 348. — Architect's Plans Part of Contract 209 

Section 349. — Contract Void for Failure to Record Specifications. .209 

Section 350. — Services of Architect 210. 

Section 351. — Liability of Architect for Negligence 210 

Section 352. — Contract for Percentage on Cost of Building 211 

Section 353. — Liability for Disclosing Intention of Owner 211 

Section 354. — Time Sffent on Plans and Specifications 212 

LIENS FOR SALARY AND WAGES. 

Section 355. — Preferred Claims for Salary and Wages 212 

Section 356. — Preferred Claims for Wages and Salaries against 
Estates 212 



CONTENTS. 



Section 357. — Wages and Salaries in Case of Attachment and 
Execution 213 



Section 358. 

Section 359. 

Section 360. 

Section 361. 



Section 362. 

Section 363. 

Section 363a. 

Section 364. 

Section 365. 

Section 366. 

Section 367.- 



Section 
Section 
Section 
Section 
Section 
Section 
Section 



368, 
369 
370, 
371 

374 



VENDOR'S LIEN. 

-Lien of Seller of Real Property 213 

-When Transfer of Contract Waives Vendor's Lien. .214 

-Extent of Vendor's Lien 214 

-Lien of Seller of Personal Property 214 

LIENS ON PERSONAL PROPERTY. 

-Lien for Services 215 

-Lien of Livery Stable Proprietors 215 

-Defrauding Livery Stable Keepers 216 

-Lien for Pasturing Horses or Stock 216 

-Lien of Laundry Proprietors 217 

-Lien for Repairing Personal Property 217 

-Officer's Lien 217 

LOGGER'S LIEN. 

— Lien for Labor on Logs and Lumber 217 

— Claim of Lien to be Filed for Record 218 

— When Suit Must Be Commenced to Foreclose Lien. 218 

— Attachment as Further Security 218 

— Undertaking on Attachment 219 

— Extent of the Lien 219 

— Attachment Not necessary to Hold Lien 219 



LIEN OF PERSONS WORKING ON THRESHING-MACHINES. 

Section 375. — Persons Entitled to the Lien 220 

Section 2)i^- — Extent of Lien 220 

Section yjj. — Suit Must Be Commenced within Ten Days 220 

Section 378. — Proceeds of Sale Distributed Pro Rata 220 

Section 379. — No Notice Required 220 

Section 380. — Lien Is Assignable 221 

LIENS IN FAVOR OF OWNERS OF STALLIONS, JACKS, 
AND BULLS. 

Section 381. — Persons Entitled to the Lien 221 

Section 382. — Claim to be Filed 221 

Section 383. — Notice to Subsequent Purchasers 221 

Section 384. — False Representations Invalidate Lien 222 

Section 385. — Suits to Foreclose 222 

S"< ction 386. — Attachment as Security 222 

DAMAGES FOR BREACH OF CONTRACT. 

Section 387. — Measure of Damages 222 

Section 388. — Breach of Contract to Pay Money 223 

Section 389. — Breach of Warranty of Title 223 

Section 390. — Damages in Case of Exchange of Lands 223 

Section 391. — Breach of Agreement to Convey Real Property 224 

Section 392. — Breach of Agreement to Buy Real Property 224 



CONTENTS. xvii 

PAGE 

Section 393. — Breach of. Warranty of Title to Personal Property. .224 
Section 394. — Damages for Breach of Warranty of Quality of 

Personal Property 224 

Section 395. — Breach of Warranty for Special Purpose 224 

Section 396. — Damages for Breach of Carrier's Obligations.. 225 

Section 397. — Damages for Breach of Other Contracts 226 

PARTNERSHIP. 

Section 398. — What Constitutes a Partnership 226 

Section 399. — Formation of Partnership 227 

Section 400. — Partnership Property 227 

Section 401. — Partner's Interest in Partnership Property 228 

Section 402. — Possession of Partnership Property 228 

Section 403. — Partner's Share in Profits and Losses 229 

Section 404. — Application of Partnership Property to Payment of 

Debts 230 

Section 405. — What Is Partnership Property 230 

Section 406. — Mutual Obligations of Partners 231 

Section 407. — Liability of Partners to Account 232 

Section 408. — Compensation for Services to .Firm 232 

Section 409. — Renunciation of Partnership 233 

Section 410. — Power of Majority of Partners 234 

Section 411. — Authority of Individual Partner 234 

Section 412. — What Partner Cannot Do 236 

Section 4x3. — Partner Engaging in Other Business 236 

Section 414. — General Liability of Partner 236 

Section 415. — Liability of One Who Permits Himself to be Held 

Out as a Partner 236 

Section 416. — Doing Business under Fictitious Name 237 

Section 417. — Special Partnerships 237 

Section 418. — Certified Statement of Special Partnership 238 

Section 419. — Special Partnership. — Liability of the Partners. = ... .238 

Section 420. — Rights of Special Partners 239 

Section 421. — Interest and Profits of Special Partner 239 

Section 422. — Mining Partnerships 240 

Section 423. — Profits and Losses in Mining Partnership 241 

Section 424. — Liability of Mining Partners 241 

Section 425. — Mining Ground Partnership Property 241 

Section 426. — New Member of Mining Partnership 242 

Section 427. — Contract in Writing 242 

Section 428. — Owners of Majority of Shares Govern Conduct of 

Mine ." 243 

Section 429. — Duration of Partnership 243 

Section 430. — Total Dissolution of Partnership 243 

Section 431. — Partial Dissolution of Partnership 2z^ 

Section 432. — When Partner Entitled to Dissolution 244 

Section 433. — Notice of Dissolution of Partnership 250 

Section 434. — Winding up the Partnership Affairs 251 

Section 435. — Rights of Partners after Dissolution 251 

SURVEYS OF LAND. 

Section 436. — Public and Private Land Surveys 252 

Section 437. — Government Surveys 252 

Section 438. — Government Survey Accepted and Approved Is Fixed 

and Unchangeable 253 



CONTENTS. 



Section 439 

Section 440 

Section z^4i 

Section 442 

Section 443 

Section 444 

Section 445 

Section 446, 

Section 447, 

Section 448 

Section 449 

Section 450 

Section 451 

Section 452 

Section 453 

Section 454 

Section 455 

Section 456 

Section 457 

Section 458 

Section 459 

Section 460 

Section 461 



-Finding Original Location of Township Line 253 

-Field Notes and Maps 254 

-Monuments on the Ground 254 

-Townships 256 

-Sections 256 

-Subdivisions of Sections 256 

-Principal Meridians and Base Lines 257 

-Ranges 257 

-Standard Corners 257 

-Closing Corners 257 

-Township Corners 258 

-Section Corners 259 

-Quarter Section Corners 260 

-Meander Corners 261 

-Government Lines and Corners Must Control 262 

-Restoring Lost Corners 262 

-Proportionate Measurements 263 

-Instructions from the General Land Office 264 

-Manual of United States Surveying 266 

-Where Surveyor Should Start 266 

-Monuments Control Courses and Distances 267 

-Completion of United States Survey 267 

-Application to Purchase School Land 268 



SPAULDING'S TABLE FOR MEASUREMENT OF LOGS. 

Section 461a. — Legal Standard of Log Measurement 268 

Section 461b. — Explanation of Table : 272 



Section 462 
Section 463 
Section 464 
Section 465 
Section 466 

closure , 
Section 467 

Paid ... 
Section 468. 

Fence . . 
Section 469. 
Section 470. 
Section 471. 
Section 472. 

Partition 
Section 473. 
Section 474. 
Section 475. 
Section 476. 
Section 477. 
Section 478. 
Section 479. 
Section 4.80. 
Section 481. 
Section 482. 



DIVISION FENCES. 

-Fences on the Line 273 

-Mutual Obligations of Owners of Land 273 

-General Fence Law 274 

-Alameda County. — Lawful Fences 274 

-Alameda County. — Using Another's Fence for En- 

.276 

,276 



— Alameda County. — One-half the Value Must Be 
— Alameda County. — Lien for One-half the Value of 



:?6 



—Alameda County. — Partition Fences 276 

—Alameda County. — Fences on the Line 277 

—Alameda County. — Repair of Partition Fences 277 

—Alameda County. — Height of Division Fences and 

Walls in Cities and Towns 278 

—Alpine County. — Fence Law Same as in Alameda. .279 

—Amador County. — Erection of Partition Fences 279 

—Amador County. — Lawful Division Fences 279 

—Amador County. — Duty of Owners 280 

—Amador County. — Liability of Adjoining Owners. .. .281 
—Amador County. — Viewers to Decide Disagreement. .281 

—Amador County. — Trespasses by Animals 281 

—Butte County. — Fence Law Same as in Amador 282 

—Calaveras County. — Fence Law Same as in Alameda. 282 
—Colusa County. — Lawful Fences 282 



CONTENTS. XIX 

PAGE 

Section 483. — Colusa County. — Trespassing Animals 283 

Section 484. — Colusa County. — Partition Fence 283 

Section ^185. — Colusa County. — Manner of Constructing Partition 

Fences 284 

Section 486. — Colusa County. — Lands Exempted 285 

Section 487. — Colusa County. — Lands under One Enclosure 285 

Section 488. — Contra Costa County. — Fence Law Same as in 

Amador 285 

Section 489. — Del Norte County. — Fence Law Same as in Ala- 
meda County 285 

vSection 490. — El Dorado County. — Lawful Fences 285 

Section 491. — El Dorado County. — Trespass of Animals 286 

Section 492. — El Dorado County. — Other Law Same as in Amador. 286 
Section 493. — Fresno County. — Fence Law Same as in Alameda. .286 
Section 494. — Glenn County. — Fence Law Same as in Alameda. .286 
Section 495. — Humboldt County. — Fence Law Same as in Alameda. 287 
Section 496. — Inyo County. — Fence Law Same as in Alameda. .. .287 
Section 497. — Kern County. — Fence Law Same as in Alameda. .. .287 
Section 498. — Kings County. — Fence Law Same as in Alameda. .. .287 

Section 499. — Lake Count}^ — Fence Law Same as in Alameda 287 

Section 500. — Lassen County. — Fence Law Same as in Alameda. .287 
Section 501. — Los Angeles County. — Fence Law Same as in Ala- 
meda 287 

Section 502. — Madera County. — Fence Law Same as in Alameda. .288 
Section 503. — Marin County. — Fence Law Same as in Alameda. .288 
Section 504. — Mariposa County. — Fence Law Same as in Alameda. 288 
Section 505. — Mendocino County. — Fence Law Same as in Alameda. 288 
Section 506. — Merced County. — Fence Law Same as in Alameda. .288 

Section 507. — Modoc County. — Lawful Fences 288 

Section 508. — ]\Iodoc County. — Division Fences 289 

Section 509. — Modoc County. — Viewers and Award 289 

Section 510. — Modoc County. — Construction of Division Fence. .290 
Section 511. — Mono County. — Fence Law Same as in Alameda. .. .291 
Section 512. — Monterey County. — Fence Law Same as in Alameda. 291 

Section 513. — Napa County. — Lawful Fences 291 

Section 514. — Napa County. — Division Fences 292 

Section 515. — Napa County. — Repair of Division Fences 292 

Section 516. — Nevada County. — Fence Law Same as in Amador. .292 
Section 517. — Orange County. — Fence Law Same as in Alameda 

County 292 

Section 518. — Placer County. — Fence Law Same as in Colusa. . .293 
Section 519-. — Plumas County. — Fence Law Same as in Alameda. . .293 
Section 520. — Riverside County. — Fence Law Same as in Alameda. 293 
Section 521. — Sacramento County. — Fence Law Same as in Ama- 
dor County 293 

Section 522.— San Benito County. — Fence Law Same as in Ala- 
meda 293 

Section 523. — San Bernardino County. — Fence Law Same as in 

Colusa 293 

Section 524. — San Diego ' County. — Fence Law Same as in Ala- 
meda County 293 

Section 525. — San Joaquin County. — Fence Law North and East 

of San Joaquin River 294 

Section 526. — San Joaquin County. — Fence Law for Remainder 
of County 294 



XX CONTENTS. 

PAGE 

Section 526a. — San Lnis Obispo County. — Fence Law Same as in 

Amador 294 

Section 527. — San Mateo County. — Division Fences 294 

Section 528.— San Mateo County. — Notice to Build Fence 295 

Section 529. — San Mateo County. — Manner of Constructing Fences. 295 

Section 530. — San Mateo County. — Trespass by Animals 296 

Section 531. — Santa Barbara County. — Fence Law Same as in 

Amador 296 

Section 532. — Santa Clara County. — Fence Law Same as in Ala- 
meda 296 

Section 533. — Santa Cruz County. — Fence Law Same as in Alameda 

County 296 

Section 534. — Shasta County. — Fence Law Same as in Colusa 

County 296 

Section 535. — Sierra County. — Fence Law Same as in Alameda 

County 296 

Section 536. — Siskiyou County. — Fence Law Same as in Alameda. 296 
Section 537. — Solano County. — Fence Law Same as in Amador. .. .297 

Section 538. — Sonoma County.^ — Lawful Division Fences •••297 

Section 539. — Sonoma County. — Posts Used for Fences 298 

Section 540. — Sonoma County. — Owner to Build and Keep in Re- 
pair Just Portion of Fence 298 

Section 541. — Sonoma County. — Land Bordering on Highway 298 

Section 542. — Stanislaus County. — Fence Law Same as in Alameda. 298 
Section 543. — Sutter Count3^ — Fence Law Same as in Amador... 298 
Section 544. — Tehama County. — Fence Law Same as in Colusa. .298 
Section 545. — Tulare County. — Fence Law Same as in Amador. .299 

Section 546.— Trinity County. — Lawful Fence 299 

Section 547.— Trinity County.^Trespasses by Animals 299 

Section 548. — Tuolumne County. — Fence Law Same as in Amador. 299 
Section 549. — Ventura County. — Fence Law Same as in Amador. .299 
Section 550. — Yolo County. — Fence Law Same as in Alameda. .. .300 
Section 551. — Yuba County. — Fence Law Same as in Amador 300 

RIGHTS AND LIABILITIES OF PROFESSIONAL MEN.— 
PHYSICIANS AND SURGEONS. 

Section 552.— Duty of Physician and Surgeon 300 

Section 553. — Liability for Injury to Patient 301 

Section 554. — Delay in Making Amputation 301 

Section 555. — Failure to Use Proper Appliances 302 

Section 556. — Skill According to Locality 302 

Section 557. — Liability for Abandoning Case 303 

Section 558.— Abandoning Confinement Case 304 

Section 559. — Liability for Negligence in Case of Gratuitous 

Service 304 

Section 560. — Burden of Proof in Suit for Damages 305 

Section 561.- — Negligence of Patient Contributing to the Injury... 305 

Section 562. — Diploma No Proof of Skill or Lack of Skill 305 

Section 563. — Criminal Liability 306 

Section 564. — Board of Medical Examiners 306 

Section 565. — Practicing without a License 306 

Section 566. — Evidence in Trials for Practicing without License. .308 

Section 567. — Right to Jury Trial 308 

Section 568. — Cases of Emergency 309 

Section 569. — Compensation of Physicians 309 



CONTENTS. 



Section 
Section 
Section 
Section 
Section 



570. — Phj^sicians as Expert Witnesses 311 



571 
572 
573 
574 



-Witness Fees of Physician 311 

-Medical Testimony in Will Cases 311 

-Privileged Communications Generally 312 

-County Physicians 313 



RIGPITS AND LIABILITIES OF PROFESSIONAL MEN.— 
DENTISTS. 

Section 575. — Liability for Negligence 313 

Section 576. — Compensation of Dentists 314 

RIGHTS AND LIABILITIES OF PROFESSIONAL MEN.— 
OCULISTS. 

Section 577. — Liability for Negligence 314 

Section 578. — Compensation of Oculists 315 

RIGHTS AND LIABILITIES OF PROFESSIONAL MEN.— 
ATTORNEYS AT LAW. 

Section 579. — Duties of Attorneys 315 

Section 580. — Authority of Attorney 316 

Section 581. — Compensation of Attorney 316 

Section 582. — Change of Attorney .316 

Section 583. — Liability of Attorney 316 

RIGHTS AND LIABILITIES OF PROFESSIONAL MEN.— 
TEACHERS IN THE PUBLIC SCHOOLS. 

Male and Female Teachers 317 

Employment of the Teacher S'^7 

Term of Employment 317 

— Election for Life 318 

— Contract with Teacher : 320 

— Dismissal of Teacher 320 

— Duty of Teachers 321 

— Duty to Teach Principles of Morality 321 

— Right of Teacher to Punish Pupils 322 

Teacher's Liability for Cruel and Unusual Punish- 
il 



Section 


584.- 


Section 


S8s.- 


Section 


S86.- 


Section 


S87.- 


Section 


S88.- 


Section 


58Q.- 


Section 


5Q0.- 


Section 


5QI.- 


Section 


.SQ2.- 


Section 


,SQ3.- 


ment of 


Section 


5Q4.- 


Section 


595-- 


Section 


5q6.- 


Section 


SQ7.- 


Section 


SQ8.- 


Section 


SQQ.- 


Section 


600.- 


Section 


601. 


Section 


602.- 


Section 


603.- 


Section 


604. 


Section 


605- 



P.upi 



'322 



-Admission of Chinese Children 323 

-Admission of Colored Children 323 

SEARCHERS OF RECORD. 

-Abstracts of Title 324 

-Searchers of Record 324 

-Liability of Searchers of Record 325 

-To Whom Liable 325 

-Liability for Mistake 326 

-Liability for Omitting Encumbrance 326 

-Marginal Reference in Record Book 326 

-Omitting Judgment and Sale 327 

-Incorrect Report of Quantity of Land Conveyed. .. .327 
-Measure of Damages 328 



CONTENTS. 



Section 6o6.- 
Section 607.- 



Section 608 

Section 609. 

Section 610, 

Section 611 

Section 612 

Section 613 

Section 614. 

Section 615 

Section 616 
strument 

Section 617 

Section 618 

Section 619 



-When Suit for Damages Must Be Commenced. .. .328 
-Sale of Good Will of Abstracting Business 328 

NOTARY PUBLIC. 

-Duties of Notary 328 

-Bond of Notary 329 

-Liability of Notary 329 

-What Acts Covered by Official Bond 329 

-Liability of Sureties on Official Bond 330 

-Premature Protest of Promissory Note 330 

-False Certificate to Acknowledgment 331 

-Notary Cannot Amend Certificate 332 

-Notary's Knowledge of Party Acknowledging In- 

ZZ2 

.-334 

334 

335 



-Party Introduced to Notary. 
-Misappropriation of Moneys . 
-Fees of Notary 



CARRIERS OF FREIGHT. 

Section 620. — Freight and Freightage 335 

Section 621. — Care and Diligence Required of Carriers 335 

Section 622. — Directions to Carriers 336 

Section 623. — Delivery of Freight 33O 

Section 624. — Obligations of Carrier When Freight Not Delivered. 336 

Section 625. — Bill of Lading ^2,7 

Section 626. — Number of Bills of Lading 338 

Section 627. — Carrier Exonerated by Delivery .338 

Section 628.— When Freight Must Be Paid 338 

Section 629. — Who Must Pay Freight 339 

Section 630. — Freight Carried Farther Than Agreed 339 

Section 631. — Obligation to Accept Freight 339 

Section 632. — Agreements to Limit Liability 340 

Section .633. — General Liability of Common Carriers for Loss... 341 

Section 634. — Liability for Delay 341 

Section 635. — Shipment of Gold, Precious Stones, Statuary, Pic- 
tures, Glass or Chinaware ZA^ 

Section 62,6. — Accepting Freight for Place beyond Usual Route... 342 



Section 62,7 

Section 638 

Section 639, 

Section 640, 

Section 641 

Section 642 

Section 643 

Section 644 



Section 645. 
Section 646. 
Section 647. 



LETTERS OF CREDIT. 

-What Is a Letter of Credit 342 

-How Addressed 343 

-Letters General or Special 343 

-Liability of the Writer .343 

-Letter of Credit May Be a Continuing Guaranty. .343 

-When Notice to the Writer Necessary 343 

-Credit Given Must Agree with Terms of Letter 344 

-Intention of Parties 344 

BILLS OF EXCHANGE. 

-Nature of Bills of Exchange 345 

-Bill in Parts of a Set. 345 

-Where Bill of Exchange Is Payable 345 



CONTENTS. XXlll 

PAGE 

Section 648. — When Bill of Exchange May Be Presented for 

Acceptance 346 

Section 649. — How Presentment Must Be Made 346 

Section 650. — Acceptance Must Be in Writing. 347 

Section 651. — What May Be Treated as Sufficient Acceptance 347 

Section 652. — When Acceptance May Be Canceled 347 

Section 653. — What Is Admitted by Acceptance 348 

Section 654. — Acceptance or Payment for Honor 348 

Section 655. — Presentment for Payment 348 

Section 656. — Foreign Bills 349 

Section 657. — Protest of Foreign Bill of Exchange 349 

Section 658. — Damages Allowed on Dishonor of Bill of Exchange. 351 

ASSIGNMENT FOR BENEFIT OF CREDITORS. 

Section 659. — Assignment by Insolvent Debtor 352 

Section 660. — What Is Insolvency 353 

Section 661. — Void Assignment 354 

Section 662. — Inventory to be Made by Debtor 354 

Section 663. — Failure to File Inventory 355 

Section 664. — Effect of Failure to Record Assignment 355 

Section 665. — Bond of Assignee 356 

Section 666. — Accounting by Assignee 356 

Section 667. — Property Exempt from Assignment 356 

Section 668. — Compensation of Assignee 356 

Section 669. — Assignee Protected for Acts Done in Good Faith. .357 

Section 670. — Assignment Not Revocable 357 

Section 671. — Creditor's Claims 357 

Section 672. — Creditor Holding Mortgage or Pledge 357 



PART II 



Collection of Bills and Accounts 



bcction (>']2) 

Section 674 

Section 675, 

Section 676 

Section 6^7 

Section 678 

Section 679 

Section 680 

Section 681 

Section 682 

Section 683 

Section 684, 

Section 685 

Section 686 

Section 687 

Section 688 

Section 689 

Section 690 

Section 691 



-Methods of Making Collections 359 

-Presentment of Bills or Statements of Account 359 

-Itemized Account 359 

-Open and Current Account 359 

-When Open Account Outlaws 360 

-Mutual Account 360 

-When Mutual Account Outlaws 361 

-Stated Account 361 

-When Stated Account Outlaws 361 

-Interest on Stated Account 362 

-Assignment for Collection 362 

-Assignee May Sue in His Own Name 362 

-Assignment May Be Verbal or Written 363 

-Assignment by One Partner of Partnership Account. 363 

-Collection of Accounts When Books Are Lost 363 

-What Debtor May Set Off against Assigned Account. 363 

-Authority of Agent in Making Collections 364 

-Ratification of Agent's Acts 364 

-Agent's Commissions upon Collections 365 



XXIV CONTENTS. 

PAGE 

Section 692. — Collection of Bills and Accounts When Debtor Is 

Dead 365 

Section 693. — Suit in Justice Court on Bills and Accounts 365 

Section 694. — In What Township Suit Must Be Brought 366 

Section 695. — Suit in Superior Court on Bills and Accounts 366 

Section 696. — In What County Suit in Superior Court Must Be 

Brought 366 

Section 697. — Attachment of Debtor's Property in Suit to Collect 

Account -^^y 

Section 698. — Means for Collection to be Employed by Agent.... 367 

Section 699. — Payment to Wife of Creditor 367 

Section 700. — Payment of Note to Supposed Agent 367 

Section 701. — Taking Goods for Creditor's Claims -^(iy 

Section 702. — Accepting Promissory Note 368 

Section 703. — Collection of Notes by Agent 368 



PART III 



Notes and flortgages 



Section 704. — 

Section 705. 

Section 706 

Section 707 

Section 708 

Section 709 

Section 710 

Section 711 

Section 712 

Section 713 

Section 714 

Section 715 

Section 716 

tingency 

Section 717 

Section 718 

Section 719, 

Section 720 

Section 721 

Section 722 

Section 723 

Section 724 

Section 725 

Section 726 

Section 727 

Section 728 

Section 729 

Section 730. — 

Section 731. — 

Section 'j'^2 

Negotiable 



PROMISSORY NOTES. 

What Is a Promissory Note 369 

Who May Be Parties 369 

Note Made by Minor 370 

Note Made to Minor 371 

Note Made by Married Woman 371 

Note Made to Married Woman 372 

Note Made by Corporation ZT^- 

Note Made to Corporation 375 

Note Must Be in Writing 375 

Note May Be in Pencil 375 

Must Be for the Payment of Money 375 

Must Be for a Certain Specified Amount 376 

Must Not Be Subject to Any Condition or Con- 



Form of Note y?^ 

Time of Payment yjy 

Place of Payment 378 

Date of Note 378 

Note Not Dated Is Valid 378 

How Must Be Signed by Maker 379 

Form of Note Signed with an X 379 

Maker's Name Spelled Wrong 379 

Name of Person to Whom Note Is Payable 379 

Note Payable on or before a Certain Date 380 

Form of Note Payable on or before a Certain Date. .380 

Note with Payee Blank 380 

Note Payable to Order of Maker 381 

When Note Is Negotiable 381 

When Note Is Not Negotiable 381 

Difference between Negotiable Note and Note Not 
381 



CONTENTS. 



Section 72)3-- 

Section 734.- 

Section 735.- 

Section 736.- 

Section 7Z7- 

Section 738.- 

Section 739.- 

vSection 740.- 

Section 741.- 

Section 742.- 

Section 743.- 

Section 744.- 

Section 745.- 

Section 746.- 

Section 747.- 

Section 748.- 

Section 749.- 

Section 750.- 

Section 751.- 

Section 752.- 

Section 753.- 

Section 754.- 

vSection 755.- 

ment ... 

Section 756.- 

Section 757.- 

bection 758.- 

Section 759.- 

Section 760.- 

Section 761.- 

Section 762.- 

Section 763.- 

Section 764.- 

SectJon 765.- 

Section 766.- 

Br ought 



-Joint Note 382 

-Form of Joint Note 383 

-Liability on Joint Note 383 

-Joint and Several Note 383 

-Form of Joint and Several Note 383 

-Liability of Makers of Joint and Several Note 384 

-Interest 384 

-Legal Rate of Interest 385 

-Attorney Fees 385 

-When Note Is Outlawed 385 

-When Outlawed Note Is Renewed 386 

-Indorsement of Negotiable Note 387 

-Kinds of Indorsements 387 

-General Indorsement 387 

-Special Indorsement 388 

-Assignment of Note Not Negotiable 388 

-Liability of Indorsers 388 

-Indorsement ''without Recourse" 389 

-Rights of Indorsee in Due Course of Business 389 

-When Note Must Be Presented for Payment 390 

-By Whom Note Must Be Presented for Payment. . .391 
-To Whom Note Must Be Presented for Payment. .391 
-At What Place Note Must Be Presented for Pay- 

• 391 

-What Will Excuse Presentment for Payment 392 

-What Is Reasonable Diligence 392 

-When a Note Is Dishonored .393 

-Not.ce of Dishonor 393 

-How Notice of Dishonor May Be Given 393 

-Wlien Notice of Dishonor Must Be Given 394 

-Form of Notice of Dishonor 394 

-When Notice of Dishonor Is Excused 395 

-Protest of Foreign Note 395 

-When Suit to Collect Note Can Be Brought 395 

-In What Court Suit to Collect Note Must Be 
396 



MORTGAGES. 

Section 767. — Mortgage Security 396 

Section 768. — What Interest in Real Property May Be Mortgaged. 396 

Section 769. — What Personal Property May Be Mortgaged 397 

Section 770. — How Mortgage Is Executed and Acknowledged. ., .397 

Section 771. — Mortgage of Married Woman 398 

Section 772. — Mortgage of Minor 398 

Section 77^. — Mortgage of Partnership Property ; 398 

Section 774. — Recording Mortgages .398 

Section 774a. — Proof of Execution of Mortgage 399 

Section 775. — Effect of Recording Mortgages of Real Property. .399 

Section 776. — Effect of -Recording a Chattel Mortgage 399 

Section . 777. — Mortgage Not Recorded Good between Parties. .. .400 

Section 778. — Mortgage on Homestead 400 

Section 779. — Declaration of Homestead 400 

Section 780. — Form of Declaration of Homestead by Husband 

and Wife 401 

Section 781. — Form of Declaration of Homestead by Husband.. 402 



XXVI CONTENTS. 

PAGE 

Section 782. — Form of Declaration of Homestead by Wife 403 

Section 783. — Value of Homestead 404 

Section 784. — Form of Real Estate Mortgage 405 

Section 785. — Rules Which Apply to Chattel Mortgages 406 

Section 786. — Form of Chattel Mortgage 407 

Section 787. — Deed as Security and Agreement to Deed Back.... 409 

Section 788. — Lawful Interest 410 

Section 789. — Legal Rate Where No Interest Specified 410 

Section 790. — Compound Interest 410 

Section 791. — Interest on Judgment 410 

Section 792. — Who Must Pay Taxes on Mortgage 411 

Section 793. — Insurance on Mortgaged Buildings 411 

Section 794. — Attorney Fees 41 1 

Section 795. — Mortgage for Future Advances 411 

bection 796. — First and Second Mortgages 41 1 

Section 797. — In What Court Suit Must Be Brought to Foreclose 

Mortgage 412 

Section 798. — When Mortgage Is Outlawed 412 

Section 799. — What Property Can Be Sold to Satisfy Mortgage. .412 

Section 800. — Order in Which Property Must Be Sold 412 

Section 801. — Costs of Foreclosure 413 

Section 802. — Who May Buy at Foreclosure Sale 413 

Section 803. — Certificate of Sale 413 

Section 804. — Assignment of Certificate of Sale 413 

Section 805. — What Property Can Be Redeemed 414 

Section 806. — Time for Redemption • 414 

Section 807. — Who May Redeem ., 414 

Section 808. — How to Redeem 414 

Section 809. — The Sheriff's Deed 415 

Section 810. — Deficiency Judgment 415 

Section 811. — Possession of Property during Foreclosure Proceed- 
ings 416 

Section 812. — Possession of Real Property during Time for Re- 
demption 416 

Section 813. — Right to P.ents and Profits 416 

Section 814. — Who Must Pay for Improvements Made during 

Foreclosure Proceedings 417 

Section 815. — How to Collect a Note When Maker Is Dead 417 

Section 816. — Excuse for Not Presenting Claim in Time 418 

Section 817. — Foreclosure of Mortgage When the Maker Is Dead. 418 

Section 818. — Foreclosure of Mortgage Payable in Installments. .418 

Section 819. — Collection of Lost or Destroyed Note 419 

Section 820. — Note Made by Partners 419 

Section 821. — Liability of Partners on Partnership Note 419 

Section 821a. — Assignment of Mortgage 420 



PART IV 
Attachments and Executions 

ATTACHMENTS. 

Section 822. — Attachment of Debtor's Property 421 

Section 823. — What Property Can Be Attached 421 

Section 824. — What Property Is Exempt from Attachment or Ex- 
ecution 422 



CONTENTS. 



Section 825. — Mortgaged Property May Be Attached 426 

Section 826. — Creditor Liable for Unlawful Attachment 426 

Section 827. — Creditor Attaching Personal Property Must Pay 

Mortgage 426 

Section 828. — Garnishment 4^27 

Section 829. — For What Property Garnishee Liable 427 

Section 830. — Money Due as Salary to Public Officer 427 

Section 831. — Money in the Hands of the Law 428 

Section 832. — Attachment of Partnership Property 428 

Section 833. — Dissolution of Attachment 429 

Section 834. — Bond for Release of Attached Property 429 

JUDGMENTS AND EXECUTIONS. 

Section 835. — Judgments 429 

Section 836. — Judgment a Lien on Real Property 430 

Section 837. — How Long Judgment Lien Contmues 430 

Section 838. — Judgment Lien on Property in Another County... 430 

vSection 839. — How Justice Court Judgment Is Made Lien on Real 

Property 431 

Section 840. — Time within Which Execution May Issue 431 

Section 841. — Exemption Must Be Claimed by Debtor 431 



Section 842 

Section 843 

Section 844 

Section 845 

Section 846 

Section 847 

Section 848 

Section 849 

Section 850, 

Section 851 

Section 852 

Section 853 

Section 854 

Section 85^ 

Section 856 

Section 857 

Section 858 

Section 859 

Section 860 

Section 861 



PART V 

Last Wills and Testaments 

-Making a Will 432 

-Who May Make a Will 433 

-Will of Married Woman 433 

-What May Be Disposed of by Will 433 

-Who May Take by Will 433 

-Kmds of Wills 434 

-Nuncupative Wills 434 

-Olographic Wills 434 

-Form of Olographic Will 430 

-Will Attested by Witnesses .436 

-Gifts to Subscribing Witnesses .437 

-How a Will Is Revoked 437 

-Revocation by Marriage 438 

-Share of Child Born after the Will 438 

-Omission to Provide for Children 438 

-Children of Devisee 439 

-When Will Takes Effect 439 

-When Legacies Are Due 439 

-Interest on Legacies 439 

-Grounds for Contest of Will 439 



PART VI 

Estray Law of California 

Section 862. — Taking up Domestic Animals 441 

Section 863. — Notice to be Filed with the County Recorder 441 

Section 864. — Fee for FiHng Notice /^4i 



XXVlll CONTENTS. 

PAGE 

Section 865. — Form of Notice 44:2 

Section 866. — When Owner Ma}- Demand Possession 442 

Section S67. — Suit by Owner 443 

Section 868. — Proceedings When Owner Does Not Appear 443 

Section 869. — Form of Notice to the Constable z^43 

Section 870. — Sale by Constable \ ] 4 

Section 871. — Disposition of Money from Sale 444 



PART VII 



Corporations in California 

Fection 872. — Nature of Corporations 445 

Section S73. — For What Purpose Corporations May Be Formed.. 445 

Section 874. — Wlio May Form a Corporation 446 

Section 875. — Articles of Incorporation 446 

Section 876. — Form of Articles of Incorporation 446 

Section S77. — Number of Signers 448 

Section 878. — Filing of Articles of Incorporation 449 

Section 879. — Certificate of Secretary of State 449 

Section 880. — Name of Corporation Must Be New 449 

Section 881. — Cost of Incorporating 450 

Section 882. — Limit of Corporate Existence 450 

Section 883. — Extending Corporate Existence 450 

Section 884. — Amendment of Articles of Incorporation 451 

Section 8S5. — Change of Name 451 

Section 886. — Change of Place of Business 452 

Section S87. — Removal from One Location to Another in Same 

City 452 

Section 888.— Capital Stock 453 

Section 889. — Amount of Subscribed Capital to be Paid in 453 

Section 890. — Stockholders and IMembers 453 

Section 891. — Shares of Stock 453 

Section 892. — Subscription for Stock 454 

Section 893. — Transfer of Shares of Stock 454 

Section 894. — Transfer of Stock Held by Non-Resident 455 

Section 895. — Transfer of Stock Held by Married Woman 455 

Section 896. — \^oid Certificates 456 

Section 897. — Remedy against Corporation Refusing to Register 

Transfer of Stock 456 

Section 898. — Certificates of Stock Are Not Negotiable 456 

Section 899. — When Corporation Cannot Claim Its Own Stock 

Invalid 457 

Section 900. — Remedy against Corporation for Refusing to Rec- 
ognize Stockholder 457 

Section 901. — ^Mortgage of Shares of Stock 457 

Section 902. — Seal of Corporation 458 

Section 903. — Deed without Corporate Seal 458 

Section 904. — What Real Estate May Be Held by Corporation ... 458 
Section 905. — Corporation Must Keep within Object of Its Crea- 
tion 459 

Section 906. — Void Contract Cannot Be Ratified 459 

Section 907. — When Corporation Bound by Its Own Invalid Act. .460 

Section 908. — Notice to Corporation 461 



CONTENTS. XXIX 

PAGE 

Section 909. — Lease of Franchise 461 

Section 910. — Mortgage of Corporation Property 461 

Section 911. — Assignment of Accounts 462 

Section 912. — Liability of Promoters 462 

Section 913. — What Is a Corporation De Facto 463 

Section 914. — Who May Question the VaHdity of a Corporation. .463 

Section 915. — Denial That a Corporation Exists 463 

Section 916. — Stockholders Right to Inspect Books and Records. 464 

Section 917. — Motives of Stockholder in Making Examination 

of Books 465 

Section 918. — Liability of Stockholder for Furnishing Informa- 
tion to Rival Corporation . 465 

Section 919. — Remedy of Stockholder When Inspection of Books 

Is Refused 466 

Section 920. — Liability of Stockholder for Corporation Debts 466 

Section 921. — Liability of Member Where There Is No Capital 

Stock 467 

Section 922. — Pledgee or Trustee Not Liable for Debts 467 

Section 923. — When Liability of Stockholder Begins 467 

Section 924. — When Liability Not Released by Subsequent Tians- 

fer 468 

Section 925. — Stockholder May Sue Other Stockholders 469 

Section 926. — Assignee of Creditor May Sue Stockholders 469 

Section 927. — Creditor's Right to Unpaid Subscriptions 469 

Section 928. — Within What Time Suit against Stockholder May 

Be Commenced 469 

Section 929. — When Liability of Stockholder Is Satisfied 470 

Section 930. — Liability of Stockholders in Distillery for Federal 

Taxes 470 

Section 931. — Holding Property in Other Counties 471 

Section 932. — Within What Time Corporation Must Commence 

Business 471 

Section 933. — Failure to Elect Officers 471 

vSection 934. — Increase of Capital Stock 472 

Section 935. — Decrease of Capital Stock 472 

Section 936. — Certificate of Increase or Decrease of Capital Stock. 473 

Section 937. — Paper in Which Notices Must Be Published 474 

Section 938. — Assessment of Stock 474 

Section 939. — Amount of Assessment 474 

Section 940. — Order Levj-ing Assessment 475 

Section 941. — Notice of Assessment 475 

Section 942. — Form of Notice of Assessment 475 

Section 943. — How Assessment May Be Enforced 476 

Section 944. — Notice of Sale 476 

Section 945. — Form of Notice of Sale 477 

Section 946. — Who Are Liable on Assessments 477 

Section 947. — Extension of Time for Payment and Sale 478 

Section 948. — Sale of Stock for Assessment 478 

Section 949. — Purchase of Delinquent Stock by the Corporation. .479 

Section 950. — Suit to Recover Amount of Assessment 479 

Section 051. — Lien for Assessment 480 

Section 952. — By-Laws of Corporation 481 

Section 953. — How By-Laws Adopted 481 

Section 954. — What By-Laws May Provide for 481 

Section 955. — Book of By-Laws 482 

Section 956. — Amendment of By-Laws 482 



CONTENTS. 



Section 957. — Repealing Old and Adopting New By-Laws 482 

Section 958. — Record of Amendments 482 

Section 959. — The Board of Directors 483 

Section 960. — Number of Directors 483 

Section 961. — Qualification of Directors 483 

Section 962. — Directors for the First Year 484 

Section 963. — Election of Directors 484 

Section 964. — Who May Vote at Election of Directors 485 

Section 065.— Who May Vote Pledged Stock 485 

Section 966. — Who May Vote Stock in Hands of Trustee 486 

Section 967. — Who May Vote Stock in Hands of Administrator 

or Executor 486 

Section 968. — Who May Vote Stock Belonging to Minor 486 

Section 969. — Who May Vote Stock Belonging to Insane Person. 486 

Section 970. — Voting by Proxy 487 

Section 971. — Organization of Board of Directors 487 

Section 972. — Duties of President, Secretary, and Treasurer 488 

Section 973. — Other Officers 488 

Section 974. — Quorum of Directors 488 

Section 975. — Director Cannot Vote on Matter in Which He Is 

Interested 488 

Section 976. — Regular and Special Meetings 489 

Section 977. — Publicity Cannot Make Illegal Acts of Directors 

Valid 490 

Section 978. — Vacancy in Board of Directors 490 

Section 979. — Can a Corporation Perform Corporate Acts, Such as 
the Mortgaging of Its Real Property, While There Is a Va- 
cancy in Its Board of Directors ? 490 

—Services of Director Outside of His Duties as Such. .491 

—Liability of Directors for Money Embezzled 492 

—Advances of Money by Director 492 

—Directors in Two Corporations 492 

—Authority of President 493 

—President May Employ Attorney 493 

—Dividends 493 

—Extent of Debts to be Created 494 

—Records of Corporation 494 

—Removal of Directors from Office 495 

—Examination of Corporations 495 

—Dissolution of Corporation 496 

—Disposition to be Made of Property upon Dissolution. 496 

—False Reports 497 

—Transfer of Franchise 497 

—Transfer of Foreign Concessions 497 

—General Powers of Corporation 497 

—Taxation of Corporations 498 

—Laws Applying to Particular Corporations 498 

—Banking Corporations 499 

-Amount of Capital Stock .499 

(b)— When Capital Must Be Paid' in 499 

(c) — Reseive Fund 499 

(d) — Advertising by Bank 500 

(e) — Restrictions on Savings Banks .500 

(f) — List of Stockholders 500 

(g) — Lien of Bank ■. 501 

(h) — Bank Check Is Not Assignment of Funds 501 



Section 


q8o. 


Section 


981. 


Section 


982. 


Section 


Q83. 


Section 


984. 


Section 


98,S. 


Section 


986. 


Section 


987. 


Section 


988. 


Section 


989. 


Section 


Q90. 


Section 


991. 


Section 


Q92. 


Section 


003- 


Section 


994- 


Section 


Q9S. 


Section 


996. 


Section 


997- 


Section 


998. 


Section 


999- 




(a)- 



CONTENTS. XXXI 

PAGE 

Section 999. — Banking Corporations — Continued. 

(i) — Liability of Bank for Payment of Check After Death 

of Drawer 501 

(j) — National Bank Cannot Deal in Stocks 502 

Section looo. — Insurance Corporations 502 

(a) — Capital Stock 502 

(b) — When Capital Must Be Paid up 502 

(c) — Amount Which Can Be Taken on One Risk 503 

Section looi. — Railroad Corporations 503 

(a) — Articles of Incorporation 503 

(b) — Subscription to Stock of Railroad 503 

(c) — When Construction Must Be Begun 504 

(d) — Rates of Fare on Street Railroads 504 

(e)— Condemnation of Land for Right of Way 504 



PART VIII 

nines and Hining 

Section 1002. — United States Laws 506 

Section 1003. — State Laws 506 

vSection 1004. — Local Rules and Customs 506 

Section 1005. — Who May Locate a Mining Claim 507 

Section 1006. — Upon What Land Mining Claim May Be Located.. 507 

Section ioo7. — What Is Mining 507 

Section 1008.— What Constitutes a Valid Location 508 

Section 1009. — The Discovery 508 

Section loio. — -Marking the Boundaries 509 

Section loi i. — Location Notice 509 

Section 1012. — Form of Notice of Location of Lode Claim. 509 

Section 1013. — Form of Notice of Location of a Placer Claim 510 

Section 1014. — Recording Location Notice 51 1 

Section 1015. — Size of Lode Claim 511 

Section 1016. — Size of Placer Claim 512 

Section 1017.— Discovery on Placer Ground 512 

Section 1018. — Tim^e within Which Location Must Be Made after 

Discovery 513 

Section 1019. — Oil and Asphaltum 513 

Section 1020. — Annual Labor and Assessment Work 513 

vSection J021. — When First Work Must Be Done 514 

Section 1022. — Where Work Should Be Done 514 

Section 1023. — Proof of Assessment Work 515 

Section 1024. — Form of Proof of Assessment Work 515 

Section 1025. — Relocation of Claim after Forfeiture 516 

Section 1026.— Mineral Entries within Forest Reserves 517 

Section 1027. — Location by Agents 517 

Section 1028. — Location by Minors 517 

Section 1029. — Tunnel .Claim 518 

Section 1030. — Location of Tunnel Claim 518 

Section T031. — Lode and Placer Claims in the Same Ground 519 

Section 1032.^ — Mill Sites 520 

Section 1033. — Timber for Mining Purposes 520 

Section 1034. — Water and Water Rights for Mining Purposes 520 

Section 1035. — Mining Partnerships 520 

Section 1036. — Liens on Mining Claims 52; 



XXXll CONTENTS. 

PAGE 

Section 1037. — Entry of Coal Lands 521 

Section 1038. — How to Obtain a Patent to a Mining Claim 521 

Section 1039. — Mining Lease 523 

Section 1040. — Form of Mining Lease 523 

Section 1041. — Oil and Gas Leases 525 

(a) — Right to Bore for Oil Necessarily Exclusive -..526 

(b) — Lessee Must Begin Operations within a Reasonable 

Time 526 

(c) — Failure to Commence Work Forfeits the Lease 526 

(d) — Work Must Be Prosecuted with Diligence 526 

(e) — Lease Must Be Literally Complied with 527 

(f) — Failure to Find Oil 527 

(g) — Net Proceeds 527 

(h) — Failure to Pay Royalty 527 

Section 1042. — Form of Oil Lease 527 

Section 1043. — Mining Deeds 531 

Section 1044. — Form of Mining Deed 531 

Section 1045. — Working Mine on Shares 532 

Section 1046. — When Boundary Marks Are Sufficient 533 

Section 1047. — Error in Description in Location Notice 533 

Section 1048. — Character of Annual Assessment Work 534 

Section 1049. — Time within Which Relocation Can Be Made 534 

Section 1050. — Resumption of Work 535 

Section 1051. — Failure to Comply with Local Customs in Work- 
ing Mining Claims 535 

Section 1052. — Overlapping Locations 536 

Section 1053. — Intersecting Veins 536 

Section 1054.— Rule That End Lines Shall Parallel Each Other. .536 
Section 1055. — Extra-Lateral Right, or Right to Pursue the Vein 

or Lode on Its Dip beyond the Side Lines of the Claim 537 

Section 1056. — Damages for Trespass on Mining Claim 538 

Section 1057. — State Homestead on Mining Claim 539 

Section 1058. — School Lands 539 

Section 1059. — Authority of Mine Superintendents to Purchase 

Supplies 540 

Section 1060. — Hydraulic Mining 540 

Section 1061. — Tailings and Debris 540 

Section 1062. — California Debris Commission 541 

Section 1063. — Mining Corporations 542 

(a) — Consolidation of Mining Corporations 542 

(b) — Penalty for Issuing False Prospectus 543 

(c) — Transfer of Stock in Mining Corporations 543 

(d) — Sale, Lease, or Mortgage of Property 544 

(e) — Purchase of Additional Mining Ground 544 

(f)— Removal of Officers 544 

(g) — Stock to be in Name of Real Owner or Trustee. .. .545 

(h)— When Books May Be Closed 545 

(i) — Inspection of Books 545 

( j ) — Examination of Mine 545 

(k) — Penalty for Preventing Inspection 546 

(1) — Itemized Account by Directors 546 

(m) — Itemized Account by Superintendent 546 

(n) — What Must Be Done with Reports 547 

(o) — Mode of Escape from Underground Accident 547 

(p) — Liability for Damages by Accident 548 



CONTENTS. 



PART IX 



Water and Water Rights 



1064 
1065 



Section 

Section 

Section 1066 

Section 1067 

Section 1068 

Section 1069 

Section 1070 

Section 1071, 

Section 1072 

Section 1073 

Section 1074 

Section 1075 

Section 1076 

Section 1077 

(a)- 

(b)- 

(c)- 

Section 1078. 

inshaw . 

Section 1079. 

(a)- 

(b)- 

(c)- 

(d)- 

(e)- 

(f)- 

(g)- 

(h)- 

Section 1080. 



— Appropriation of Water 549 

— Notice of Appropriation 549 

— Notice Must Be Recorded 549 

— Change of Place of Intended Diversion 550 

— Form of Notice of Appropriation 550 

— When Work Must Be Commenced 551 

— Forfeiture of Claim 551 

— Riparian Rights 551 

— Protection of Riparian Rights 552 

— Water Rights on Public Land 553 

— Obtaining Title by Prescription 553 

— Water for Irrigation 553 

— Irrigation Districts 554 

— Water for Mining 555 

—The California Statute 555 

—First Appropriator Has First Right 555 

Miner's Inch of Water 555 

-Subterranean Waters — The Case of Katz vs. Walk- 

556 

— Water Companies 570 

-Water in Case of Fire 571 

-Water Rates 571 

-Duty to Furnish Water 571 

—Water Company Not Liable for Loss by Fire 571 

-Water Rates Must Be Reasonable 572 

-Damages for Failure to Supply Water 573 

-Duty to Fix Reasonable Rates Can Be Compelled. .573 

-Pollution of Water 573 

— Condemnation of Water for Public Use 574 



PART I 

BUSINESS CONTRACTS AND LEGAL 
OBLIGATIONS 

Making of Contracts 

Section i.— BUSINESS CONTRACTS.— By the above 
heading is meant the contracts and obhgations which are 
connected directly with the usual business affairs of a 
community. There are many relations in life which con- 
stitute or arise out of contracts, and yet which are not 
connected with the ordinary business affairs of men. Such 
relations it is not the purpose of this book to indicate, but 
only the contracts, the obligations, the rights and liabilities 
of business men in every-day affairs, as defined by the laws 
of California. 

Section 2*— PARTIES TO CONTRACTS.— A contract 
is an agreement to do or not to do a certain thing. It is 
essential to the existence of a contract that there should 
be parties capable of contracting, their consent, a lawful 
object, and a sufficient consideration. With reference to 
the parties to a contract, the law of California provides that 
all persons are capable of contracting, except minors, per- 
sons of unsound mind, and persons deprived of civil rights. 
A minor in this State cannot, under the age of i8, make 
a contract relating to any interest in real property, or re- 
lating to any personal property not in his immediate pos- 
session or control. -But a minor may make any other 
contract, and it will be good, unless disaffirmed and repudi- 
ated. The contract of a minor, if made by him before he 
is i8 years of age, may be disaffirmed by the minor himself, 
3 (33) 



34 BUSINESS LAWS FOR BUSINESS M^N. 

either before his majority or within a reasonable time 
afterwards, or, in case of his death within that period, by 
his heirs or personal representatives ; and if the contract 
be made by the minor when he is over the age of i8, he can 
disafifirm it, but must restore the consideration to the party 
from whom it was received, or pay its equivalent. There 
is one exception to the law above stat'ed : A minor cannot 
disaffirm a contract, because he was under age, to pay the 
reasonable value of things necessary for his support or the 
support of his family, if the contract was entered into by 
him when he was not under the care of a parent or guardian 
able to provide for him or his family. 

A minor in California is a male under the age of 21 or a 
female under the age of 18. 

A person entirely without understanding has no power 
to make a contract of any kind, but he is liable for the 
reasonable value of things furnished to him necessary for 
his support or the support of his famil}^ Where a per- 
son is of unsound mind, and yet is not entirely without 
understanding, he may enter into a contract at any time 
before his unsoundness of mind has been judicially deter- 
mined, but such contract will be voidable, subject to re- 
scission. After his incapacity has been judicially deter- 
mined, a person of unsound mind cannot make any con- 
veyance or other contract, until a court has decided that 
his reason is restored. 

A person deprived of civil rights is not capable of mak- 
ing a contract while in that condition. A person is de- 
prived of civil rights v/hen he is sentenced to imprisonment 
in the State Prison for life, and his civil rights are sus- 
pended during the term when he is sentenced for a term 
less than life. A convict ma}^ however, make and acknowl- 
edge a sale and conveyance of property. 

With the exceptions above stated, all persons in Cali- 
fornia are capable of being parties to contracts. 

Civil Code, Sections 33, 34, 38, 39, 40, 1556; Penal 
Code, Sections 673, 674, 675. 



BUSINESS CONTRACTS -a.\D L.EGAL OBLIGATIONS. 35 

Section 3.— CONSENT OF PARTIES TO CON- 
TRACT. — To constitute a valid contract, the consent of 
the parties to it must be freely given, and there must be a 
mutual consent, and their consent to the agreement must 
be communicated by each to the other. The laws of Cali- 
fornia but follov^ the principles of natural justice when 
they provide that, when the consent of a party to a contract 
is not given freely and voluntarily, but is obtained by 
fraudulent acts or misrepresentations, the contract cannot 
stand, and will be set aside by the courts whenever the 
facts are proved. Some of the facts which will render a 
contract invalid, by reason of insufificient consent of the 
parties, are where the consent of any party has been ob- 
tained by imprisonment of the person, or unlawful deten- 
tion of his property, or threats to injure his person, prop- 
erty, or character, or deceiving him by misrepresenting or 
concealing the truth, or by making a promise without any 
intention of performing it. AMienever any of these facts 
appear, to the injury of a party, the courts of California 
will set aside the contract. Also, a contract will be set 
aside, because free consent was not given, whenever one 
party in whom another has confidence uses that confi- 
dence for the purpose of taking an unfair advantage over 
the latter, or whenever one party takes an unfair advantage 
of another's weakness of mind, or whenever one party 
takes a grossly oppressive and unfair advantage of an- 
other's necessities or distress. Also, consent will not be 
considered mutual and free, whenever a mistake is made 
in entering into a contract, where either party, Avithout 
negligence on his part, acts under an unconscious igno- 
rance or forgetfulness of a fact, past or present, material 
to the contract, or acts in the belief that a thing material 
to the contract exists or has existed when in fact the thing 
does not exist and never did exist. Also, a contract will 
be set aside whenever all the parties act under a mis- 
apprehension of the law, all supposing that they know and 



36 BUSINESS LAWS FOR BUSINESS MEN. 

understand it; also, because of misapprehension of the law 
by one party to a contract, of which the other party is 
aware at the time of contracting, but which he does not 
rectify. 

Civil Code, Sections 1565, 1567, 1569, 1570, 1572, 
1575. 1577. 1578. 

Section 4.— WHEN CONSENT IS NOT MUTUAL.— 

Consent of the parties is not mutual unless the parties all 
agree upon the same thing in the same sense. 
Civil Code, Section 1580. 

Section 5.— PROPOSAL OF CONTRACT, ACCEPT- 
ANCE, AND REVOCATION.— One party may propose 
a thing, but the proposal must be accepted before a con- 
tract is created. An acceptance must be absolute and un- 
qualified. If one party makes a proposition, and the other 
replies with a proposition on his part, there is no contract, 
because the parties have not mutually agreed upon any- 
thing. The proposal may be revoked at any time before 
it is accepted. It is revoked by giving notice of its with- 
drawal to the person to whom the proposal was made. It 
is also revoked, where a certain time was given in which 
to accept, by the expiration of that time without notice of 
acceptance; it is also revoked by the failure of the person 
to whom the proposal is made to do some act which is 
required of him as a condition preceding the acceptance ; 
and a proposal is necessarily considered revoked by the 
death or insanity of the proposer. Any usual and reason- 
able mode of giving notice of acceptance of a proposal may 
be adopted, as, by mail, or in person, or by messenger, and 
it will be sufficient to constitute a contract. But the pro- 
poser may prescribe a certain mode in which notice of 
acceptance must be given, and the proposer will not be 
bound unless the mode prescribed by him is adopted. 

Civil Code, Sections 1582, 1583, 1585, 1586, 1587. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 37 

Section 6.— OBJECTS OF CONTRACT.— The object 
of a contract must be lawful when the contract is made, 
and possible of performance, and certain in its terms. 
However, the law considers everything possible except that 
which is impossible in the nature of things, and, therefore, 
to render a contract invalid for impossibility of perform- 
ance, it must be apparent from the nature of the thing 
agreed upon that it will not be possible to perform it. 
Where a contract has but a single object, and such object 
is unlawful, whether in whole or in part, or wholly impos- 
sible of performance, or so vaguely expressed as to be 
wholly unascertainable, the entire contract is void. But 
where a contract has several distinct objects, of which one 
at least is lawful, in whole or in part, the contract is void 
as to the unlawful object, and valid as to the rest. An 
illustration of a contract, void in part and valid in part, 
may be had in a mortgage which provides for the payment 
of taxes on the mortgage by the mortgagor, this condition 
being prohibited by the Constitution of the State of Cali- 
fornia. The Constitution provides that by reason of this 
condition in a mortgage the mortgagee shall forfeit his 
interest; therefore, the mortgage contract is valid as to the 
principal, and void as to the taxes and interest. 

Civil Code, Sections 1595, 1596, 1597, 1598, 1599. 

Section 7.— CONSIDERATION OF A CONTRACT. 

— The consideration of a contract need not necessarily be 
money. "Of course, the consideration must be lawful, that 
is, it must not be contrary to any express provision of law, 
or against the policy of express law, or contrary to good 
morals. But the consideration may consist in any benefit 
conferred or agreed to be conferred upon the promisor by 
any other person, to which the promisor is not already law- 
fully entitled, or in any prejudice suffered or agreed to be 
suffered by the person to whom the promise is made, which 
he is not already lawfully bound to suffer. The abandon- 
ment of a right, or forbearing to enforce a claim, or any 



38 busine:ss laws for busine:ss men. 

detriment suffered by the promisee, will constitute suffi- 
cient consideration for a contract, and be as binding as 
though the payment of money were agreed upon. 
Civil Code, Sections 1605, 1607, 1667. 

Section 8.— WHAT CONTRACTS MAY BE VERBAL. 

— All contracts may be entered into verbally, except such 
as are specially required by law to be in writing. If the 
contract is one which the law does not specially require 
to be in writing, the verbal agreement of the parties is 
as good as any other, and as binding as it would be if 
reduced to writing. 

Section 9.— WHAT CONTRACTS MUST BE IN 
WRITING.— The law of California provides that the fol- 
lowing contracts are invalid, unless the contract, or some 
note or memorandum describing its terms, is put into writ- 
ing and subscribed by the party to be charged, or by his 
agent: (i) An agreement that by its terms is not to be 
performed within a year from the making thereof ; (2) A 
special promise to answer for the debt, default, or mis- 
carriage of another; but there is one exception to this pro- 
vision, where it appears that the promise was such as the 
law considers an original obligation on the part of the 
promisor; (3) An agreement made upon consideration of 
marriage, other than a mutual promise to marry ; (4) An 
agreement for the sale of goods, chattels, or things in ac- 
tion, at a price not less than two hundred dollars, unless 
the buyer accepts or receives part of such goods and chat- 
tels, or the evidences, or some of them, of such things in 
action, or pay at the time some part of the purchase money ; 
but, when a sale is made at auction, an entry by the 
auctioneer in his sale book, at the time of the sale, of the 
kind of property sold, the terms of the sale, the price, and 
the names of the purchaser and person on whose account 
the sale is made, is a sufficient memorandum; (5) An agree- 
ment for the leasing for a longer period than one year, or 



BUSINESS CONTRACTS AND LFXAL OBLIGATIONS. 89 

for the sale of real property, or for an interest therein ; and 
such agreement, if made by an agent of the party sought 
to be charged, is invalid, unless the authority of the agent 
is in writing, and subscribed by the party sought to be 
charged ; (6) An agreement authorizing or employing an 
agent or broker to purchase or sell real estate for compen- 
sation or commission. 

Civil Code, Section 1624. 

Section 10.— CONTRACTS AGAINST PUBLIC POL- 
ICY. — There are certain contracts which the law says are 
against public policy, and therefore invalid. Generally any 
contract which has for its object the violation of any law 
of the land would be illegal, without reference to the ques- 
tion of public policy. But the State recognizes the usual 
and natural distinctions betv/een morality and immorality, 
that which is inherently right and that which is inherently 
wrong, and forbids, on the ground of public policy, cer- 
tain contracts wdiich may not be forbidden by the statutes. 
Therefore it is said that all contracts in violation of moral- 
ity are void ; that agreements to do acts forbidden by the 
law of God, or which are manifestly in furtherance of im- 
morality, and tend to contaminate the public mind, can 
not be enforced in the courts of this State. Some illustra- 
tions of this rule are, where lodgings are leased for purposes 
of prostitution ; where a contract is made for the printing 
or sale of obscene or libelous books ; so, also, contracts to 
prevent competition at an auction sale, contracts in re- 
straint of trade, contracts in restraint of marriage, marriage 
brokerage contracts, wagers, and gambling contracts ; all 
of these, or others of like character, are opposed to good 
morals, and are void, whether expressly prohibited by 
statute or not. 

Section II.— CONTRACTS IN RESTRAINT OF 
TRADE. — Every contract by which any one is restrained 
from exercising a lawful profession, trade, or business of 



40 BUSINi:SS LAWS FOR BUSINESS MEN. 

any kind, is to that extent void. The courts have found 
great difficulty, however, in determining what are contracts 
in restraint of trade, within the meaning of the law. It 
is the public policy to encourage trade and traffic, and any 
contract which would have the effect of depriving the 
public of the advantages of competition in trade is void, 
as opposed to public policy. Thus, where all, or nearly 
all, of an article of trade or commerce within a community 
or district is brought within the hands of one man or set 
of men, so as to practically bring the handling or produc- 
tion of the commodity within such single control, to the 
exclusion of competition or free traffic therein, this con- 
stitutes a monopoly, and is in restraint of trade. But rea- 
sonable combinations to regulate prices are valid. But if 
one agrees with another that he will never again at any 
time or place work at his trade, or carry on his business, 
or exercise his profession, such a contract, being without 
limitation as to time or place, is considered to be in restraint 
of trade, and is void. 

Civil Code, Section 1673. 

Section 12.— SALE OF GOOD WILL OF A BUSI- 
NESS. — The sale of the good will of a business forms an 
exception to the law stated in the last Section. One who 
sells the good will of a business may agree with the buyer 
that he will not carry on a similar business within a speci- 
fied county or city, so long as the buyer, or any person to 
whom the buyer shall dispose of the good will, carries on 
a like business at the same place. There is an exception, 
also, in the case of partners. Partners may, upon a dis- 
solution of the partnership, make a valid contract that 
none of them will carry on a similar business within the 
whole or a part of the same city or town where the part- 
nership business has been transacted. 

Civil Code, Sections 1674, 1675. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 41 

Section 13.— ALTERATION OF VERBAL CON- 
TRACT. — Contracts, verbal or written, may be subse- 
quently altered, so as to make the terms or conditions dif- 
ferent from what they were at first. But where the con- 
tract was verbal only, the law provides that the consent 
of the parties to its alteration in any respect must be ex- 
pressed in writing, and where the consent to the alteration 
is thus given and made, in writing, it does not require a 
new consideration. 

Civil Code, Section 1697. 

Section 14.— ALTERATION OF WRITTEN CON- 
TRACT. — A contract in writing may be altered by a con- 
tract in writing, or by an executed oral agreement, and not 
otherwise. The executed oral agreement, which will be 
sufficient to alter a previous written contract, must consist 
in the doing or the suffering of something not required to 
be done or suffered by the terms of the writing. So, if 
the parties verbally agree upon the doing of something, 
which one or the other would be bound to do in the proper 
fulfilment of the written contract, this does not constitute 
an executed oral agreement to alter the previous writing. 
Civil Code, Section 1698. 

Section 15.— EXPRESS CONTRACTS.— An express 
contract is one the terms of which are stated in words, 
from whfch words, used in a writing or orally between the 
parties, the agreement between the parties is ascertained. 

Section 16.— IMPLIED CONTRACTS.— An implied 
contract is one the existence and terms of which are mani- 
fested by the conduct of the parties. The conduct of the 
parties towards each other, the circumstances surround- 
ing the transaction, may be such that the law will imply 
that certain agreements were entered into, although no 
evidence other than such circumstances or conduct may 



42 BUSINESS LAWS FOR BUSINESS MEN. 

exist as proof of the contracts. The law will imply that 
a party did make such a stipulation as, under the circum- 
stances disclosed, he ought, upon the principles of honesty, 
justice, and fairness, to have made. Thus, if one party 
accepts the services of another, or receives his goods, hav- 
ing reaped the benefit of such services or goods, the law 
implies a promise on his part to pay for them. 
Civil Code, Section 1621. 

Section 17.— TERMINATION OF CONTRACTS.— 

A contract is terminated, of course, when it has been fully 
performed, but it may also be rescinded or canceled under 
certain circumstances. 

Section 18.— RESCISSION OF CONTRACT.— A party 
to a contract may rescind it, if his consent to it, or the 
consent of any party jointly contracting with him, was 
given by mistake, or obtained through duress, menace, 
fraud, or undue influence on the part of the party as to 
whom he rescinds, or on the part of any other party to the 
contract jointly interested with the latter. A party to a 
contract may also rescind it if, through the fault of the 
party as to wdiom he rescinds, the consideration for his 
obligation fails, in whole or in part ; or if the consideration 
becomes entirely void, for any cause ; or if the considera- 
tion, before it is rendered to him, fails in a material respect, 
from any cause. A party to a contract may also rescind it 
by consent of all the other parties. 
Civil Code, Section 1689. 

Section 19.— EXTINCTION OF WRITTEN CON- 
TRACT BY CANCELLATION.— The destruction or can- 
cellation of a written contract, or of the signature of the 
parties, with the intent to extinguish the obligation, does 
extinguish it as to all the parties consenting to the act. But 
where a contract is executed in duplicate, the destruction 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 48 

of one copy, while the other exists, will not have the effect 
of extinguishing the contract. 

Civil Code, Sections 1699, 1701. 

Section 20.— INTERPRETATION OF CONTRACTS. 

— The essential thing in the interpretation of a contract, 
in ascertaining Avhat is meant by it, is to find the intention 
of the parties. The law of California provides that a con- 
tract must be so interpreted as to give effect to the mutual 
intention of the parties at the time of contracting, so far 
as that intention is ascertainable and lawful. The language 
of a contract is to govern its interpretation, if the lan- 
guage is clear and explicit, and does not involve an ab- 
surdity. When a contract has been reduced to writing, the 
intention of the parties is to be ascertained from the writ- 
ing alone, if possible. When, through fraud, mistake, or 
accident, a written contract fails to express the real inten- 
tion of the parties, oral evidence will be received in the 
courts to show Avhat the intention of the parties really 
was, and, when ascertained, the real intention will govern, 
and the erroneous parts of the writing will be disregarded. 
The whole of a contract is to be taken together, so as to 
give effect to every part, if reasonably practicable. The 
whole contract is to be considered, in arriving at the inten- 
tion of the parties. A contract must be given such an 
interpretation as will make it lawful, operative, definite, 
reasonable, and capable of being carried into effect, if this 
can be done without a violation of the intention of the 
parties. W^ords used in a contract are to be understood 
in their ordinary and popular sense, unless used by the 
parties in a technical sense, or unless a special meaning 
is given to the words by usage or custom. A contract may 
be explained by reference to the circumstances under which 
it was made and the matter to which it relates. However 



44 BUSINESS LAWS FOR BUSINESS MEN. 

broad may be the terms of a contract, it extends only to 
those things which it appears the parties really intended to 
include in it. 

Civil Code, Sections 1636, 1638, 1639, 1640, 1641, 
1643, 1644, 1647, 1648. 

Section 21.— PRINTED AND WRITTEN PARTS OF 
CONTRACT. — Where a contract is party written and 
partly printed, the written parts control the printed parts. 
Civil Code, Section 1651. 

Section 22.— TIME OF PERFORMANCE OF CON- 
TRACT. — If the time is specified in the contract for its 
performance, the stipulation of the parties will control. If 
no time is specified, the law allows a reasonable time. 
What is a reasonable time for the performance of a con- 
tract depends upon the circumstances and the nature of the 
thing to be done. 

Section 22a.— PLACE OF PERFORMANCE.— A con- 
tract is supposed to be made at some place, and the place 
where it becomes complete is the place where it is made. 
If a contract is made by exchange of letters, or telegrams, 
it is held to have been made at the place where the letter 
is mailed or telegram filed, containing an unconditional 
acceptance by one party of the offer of the other. If the 
communications are oral, either with or without telephone, 
between parties on opposite sides of a county line, the law 
deems the contract to have been made in the county where 
the offer of one is accepted by the other. (Decided by the 
Supreme Court of California, in the case of Bank of Yolo 
vs. The Sperry Flour Company, which decision is printed 
in Volume XXVI, California Decisions, page 936.) 

Agreements for Sale 

Section 23.— KINDS OF AGREEMENTS FOR SALE. 

— An agreement for sale is either (i) an agreement to sell. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 45 

(2) an agreement to buy, or (3) a mutual agreement to 
sell and buy. The difference between a sale and an agree- 
ment for sale is, that in a sale the subject of the contract 
becomes the property of the buyer as soon as the contract 
is concluded, while in an agreement for sale the title to 
the property remains in the vendor until the contract is 
executed. An agreement to buy is a contract by which 
one engages to accept from another and pay a price for 
the title to a certain thing. An agreement to sell is a 
contract by which one engages, for a price, to transfer to 
another the title to a certain thing. An agreement to sell 
and buy is a contract by which one engages to transfer 
the title to a certain thing to another, who engages to 
accept the same from him and to a pay a price therefor. 
Any property which, if in existence, might be the subject 
of sale, may be the subject of an agreement for sale, whether 
the property itself is then in existence or not. 

Civil Code, Sections 1726, 1727, 1728, 1729, 1730. 

Section 24.~AGREEMENT TO SELL REAL PROP- 
ERTY. — An agreement to sell real property binds the seller 
to execute a conveyance in form sufficient to pass the title 
to the property. No agreement for the sale of real prop- 
erty, or any interest in real property, is valid, unless the 
agreement, or some note or memorandum of its terms, be 
in writing and subscribed by the party to be charged or 
his agent.^ If the agreement, or the note or memorandum 
of it, is subscribed by the agent of the party, it is necessary 
to the validity of the instrument that the agent's authority 
from his principal shall be in writing, also. 
Civil Code, Sections 1731, 1741. 

Section 25.— AGREEMENT TO SELL PERSONAL 
PROPERTY. — If an agreement is made to buy or sell per- 
sonal property, and the price is two hundred dollars or 
over, the agreement is not valid unless the agreement itself, 



46 BUSINESS LAWS FOR BUSINESS MEN. 

or some note or memorandum giving its terms, is in writ- 
ing, and subscribed by the party to be charged or his agent. 
There is an exception to the law, which is where an agree- 
ment is made to manufacture a thing, from materials to 
be furnished by the manufacturer or another person. 
Civil Code, Sections 1739, 1740. 

Sale of Personal Property 

Section 26.— WHEN GOODS SOLD MUST BE DE- 
LIVERED. — One who sells personal property, whether it 
was in his possession at the time of sale or not, must put it 
into a condition fit for delivery, and deliver it to the buyer 
within a reasonable time after demand. This rule will not 
apply in some cases, however, where the seller has a lien 
on the property. Until the seller does put the goods into 
a condition fit for delivery, the title does not pass. Title 
does not pass when the property sold has not been identi- 
fied, nor when something remains to be done for the pur- 
pose of ascertaining the price, as by weighing, measuring, 
or testing the goods, where the price is to depend upon 
the quantity or quality of the goods. The property must 
be delivered within a reasonable time after demand. What 
is a reasonable time depends upon all the circumstances 
of the particular transaction. 

Civil Code, Section 1753. 

Section 27.— WHERE DELIVERY MUST BE MADE. 

— In the absence of an agreement to the contrary, the place 
where the property is at the time of the agreement of sale 
is the place of delivery ; or if the article is not then in ex- 
istence, it is deliverable at the place where it is manufac- 
tured or produced. 

Civil Code, Section 1754. 

Section 28.— WHEN PRICE OF GOODS BOUGHT 
MUST BE PAID. — Unless by agreement the price is stip- 
ulated to be paid at a different time, the law is that the 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 4/ 

buyer must pay the price of the thing sold on its cleHvery. 
and must take it away within a reasonable time after the 
seller offers to deliver it. Of course, the buyer and seller 
may agree upon any terms of payment, contrary to the 
provision of the law stated above. After personal property 
has been sold, and until the delivery is completed, the 
seller must keep the property without charge until the 
buyer has had a reasonable opportunity to remove it. 

Section 29.— RIGHT TO INSPECT GOODS BEFORE 
ACCEPTANCE. — On an agreement for sale with warranty 
the buyer has a right to inspect the thing sold, at a reason- 
able time, before accepting it, and if the seller refuse to 
permit the buyer to make a reasonable inspection of the 
thing sold, in a proper manner and at a proper time, the 
buyer may rescind the contract and refuse to take the goods. 
Civil Code, Section 1785. 

Section 30.— EXPENSE OF TRANSPORTATION.— 

One who sells personal property must bring it to his own 
door, or to some other convenient place, for its acceptance 
by the buyer, but further transportation is at the risk and 
expense of the buyer. 

Civil Code, Section 1755. 

Section -31.— BUYER'S DIRECTIONS AS TO MAN- 
NER OF SENDING THINGS SOLD.— If a seller agrees 
to send the thing sold to the buyer, he must follow the 
directions of the latter as to the manner of sending, or it 
will be at his own risk during its transportation. There- 
fore, if the buyer directs that the goods be shipped by a 
certain line or lines of carriers, the seller, if he desires to 
avoid the risk of transportation, must obey the buyer's 
directions. If he follows such directions, the transporta- 
tion is at the risk of the buyer. Also, if there are no spe- 
cial directions by the buyer as to the manner of shipment. 



48 BUSINESS LAWS FOR BUSINESS MEN. 

and the seller uses ordinary care in forwarding the goods, 
the transportation is at the buyer's own risk. 
Civil Code, Section 1757. 

Section 31a.— THE BULK LAW.— The Legislature of 
1903 passed an Act, which was approved by the Governor 
March 10, 1903, and is now in force, intended to prevent 
the fraudulent sale of a stock in trade. This law provides 
that the sale, transfer, or assignment of a stock in trade 
(or of such a quantity of a stock in trade as to be sub- 
stantially the whole thereof), in bulk, is to be conclusively 
presumed fraudulent and void, as against the existing 
creditors of the vendor, unless notice is first given by the 
vendor. The notice must be in writing, and must be 
recorded in the county where the stock of goods is located, 
at least five days prior to the sale or transfer. If the stock 
is located in two or more counties, the notice must be 
recorrled in each county; for instance, if the vendor has 
a store in Sonoma County and a store in Mendocino 
County, and intends to sell or transfer the stock in both, 
he must file his notice in the office of the County Recorder 
in each county. The required notice must, to be legal, 
be in writing, and must state the name and address of the 
vendor, transferrer, or assignor; the name and address of 
the intended vendee, transferee, or assignee; a general 
statement of the character of the property or merchandise 
intended to be sold, transferred, or assigned; the time and 
place of the payment of the purchase price agreed upon; 
or, if the intended sale is to be at public auction, the notice 
must state that fact in addition, with the time, terms, and 
place of such sale. The sale shall in no event occur within 
five days of the date when the notice is recorded. The 
above law does not apply to the sale of goods in the ordi- 
nary course of trade and in the usual method of business. 
It is intended only to protect the wholesaler against the 
sale or transfer or assignment by the retailer of his stock 
of goods before they are paid for by him. The effect of 



BUSIN:eSS CONTRACTS AND LEGAL OBLIGATIONS. 49 

the law is this : If a stock is sold without the notice, the 
wholesaler can follow the goods, and recover from the 
vendee whatever damages he has sustained by reason of 
the fraudulent sale, transfer, or assignment; and if the 
notice is given, the wholesaler will have an opportunity to 
protect himself by suit and attachment of the property 
within the five days. The law does not apply to a case 
where the debtor makes an assignment of the property for 
the benefit of creditors generally, nor does it apply to any 
sale, transfer, or assignment of any property which is by 
law exempt from execution. For a list of property exempt 
from execution, see under the head of "Attachments," 
Section 824. 

Statutes of 1903, p. iii. 

Section 31b.— BILL OF SALE.— A bill of sale need not 
be in any particular form, to be valid. It is not essential 
to its validity that it be recorded, although it may be for 
the best interests of all parties that it should be filed for 
record. A bill of sale is not required to be acknowledged, 
if it is not to be recorded ; but it must be acknowledged, 
if it is to be recorded. 

Section 31c.— FORM OF BILL OF SALE.— The fol- 
lowing is a form of bill of sale : — 

KNOW ALL MEN BY THESE PRESENTS, That I, 

of the County of , State of California, the 

party of the first part, for and in consideration of the sum 

of Dollars, Gold Coin of the United 

States of America, to me in hand paid by 

, of , the party 

of the second part, the receipt whereof is hereby acknowl- 
edged, do by these presents grant, bargain, sell, and convey 
unto the said party of the second part, his executors, ad- 
ministrators, and assigns, the following described personal 

property : 

(Here describe property sold.) 



50 BUSINESS LAWS EOR BUSINESS MEN. 

To have and to hold the same to the said party of the sec- 
ond part, his executors, administrators, and assigns forever. 
And I do for myself, my heirs, executors, and administrators, 
covenant and agree to and with the said party of the sec- 
ond part, his executors, administrators, and assigns, to 
warrant and defend the sale of said property, goods, and 
chattels hereby made, unto the said party of the second 
part, his executors, administrators, and assigns, against all 
and every person and persons, whomsoever, lawfully claim- 
ing or to claim the same. 

In witness whereof, the said party of the first part has 

hereunto set his hand and seal, the day of , 

190. .. 

(Seal.) 

Installment Sales 

Section sid.— CONDITIONAL SALES OF PER- 
SONAL PROPERTY.— Where personal property is de- 
livered, under a contract for payments on installments, title 
to remain in the vendor until final payment, it is a con- 
ditional sale. The title to the property' does not pass from 
the vendor, nor vest in the vendee, until the contract is 
completed upon the payment of the last installment. 

Section 316.— LANGUAGE OF THE CONTRACT.— 

It makes no difference what language is used in the con- 
tract, if the intention of the parties is to be seen, that the 
vendor retains the title until the money is paid. The paper 
may be called a ''deed," or "agreement," or ''lease," and 
the designation will not affect the real meaning of the 
contract. It is only a conditional sale, no more, no less, 
whatever the language used in the contract may be. In 
the case of Lundy Furniture Company vs. White, our Su- 
preme Court said, "Where goods were delivered under a 
contract, designated as a lease, providing for a monthly 
rental, and that the consent of the seller should be neces- 
sary for removal of the goods from the purchaser's resi- 
dence, and reserving title in the seller until full payment. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 51 

after which a bill of sale was to be given, the transaction 
was a conditional sale, and the title remained in the seller. 
The name by which the parties designate their contract 
is not determinative of its nature. The calling of this 
agreement a 'lease' did not make it such. The payments, 
to be made monthly in installments, designated 'rent/ 
were in fact nothing but partial payments." (Decided by 
the Supreme Court of California, in the case of f.undy 
Furniture Company vs. White, which decision is printed 
in Volume 126 of the California Reports, page 170.) 

Section sif.— DEFAULT IN PAYMENTS.— It is the 

duty of the vendee to make payments of the installments 
when due. He has no right, after he has received the 
property, to change or alter in any way the terms of 
payments. If he does not pay when due, this will amount 
to a default on his part, and a breach of the contract, for 
which the vendor may take immediate action. 

Section 3ig.— SALE BY VENDEE TO ANOTHER 

PERSON. — The party receiving the property has no right 
to sell it until the purchase price is paid. If the vendee 
sells the property, the purchaser from him obtains no title, 
and the original vendor may recover the property. The 
second vendee is not entitled to stand in any better situa- 
tion than his vendor in regard to the title of the property. 
And where the owner of a piano sold it on the installment 
plan, with the condition that the title should remain in 
the seller until final payment, and the vendee sold the 
piano before payment of the final installment, the Supreme 
Court held that the purchaser from him got no title, and 
the true owner was entitled to recover his property. (De- 
cided by the Supreme Court of California in the case of 
Kohler vs. Hayes, which decision is printed in Volume 41 
of the California Reports, page 445.) 



52 BUSINESS LAWS FOR BUSINESS MEN. 

Section 3ih.— REMEDY OF SELLER IN CASE OF 
PURCHASER'S DEFAULT.— If the purchaser fails to 
make payments as they accrue, and lets the installments 
or any of them go by default, the seller has either one 
of two remedies: (i) He may, upon the default of the 
purchaser in meeting the stipulated payments, or any of 
them, treat the contract as no sale, and take the property 
into his own possession again. If he is prevented by the 
purchaser from retaking the property, he may go into 
court and recover it in a suit on claim and delivery. (2) 
Or, the seller may treat the sale as an absolute one, and 
bring a suit to recover each installment as default is made 
in payment; in which case, other property of the seller 
(not exempt from execution) may be attached and levied 
upon to pay the judgment obtained against him. (Decided 
by the Supreme Court, in the case of Holt Manufacturing 
Company vs. Ewing, which decision is printed in Volume 
109 of the California Reports, page 353.) 

Section 3ii.— MONEY ALREADY PAID.— It is lawful 
for the contract to provide that all installments paid before 
default shall be forfeited as damages for the use of the 
property, or as rent, and such conditions, if fairly entered 
into, will be enforced by the law of California. The parties 
to a conditional installment sale have the right to agree 
upon a certain sum as damages, which is called "liquidated 
damages," to belong to the seller in case of default on the 
part of the purchaser. 

Civil Code, Section 1671. 

Section 31J.— ABSOLUTE SALE ON INSTALL- 
MENTS. — A sale of personal property, the purchase price 
to be paid in installments, may be made without any 
other conditions. In this case, the sale is absolute, and 
passes the title to the purchaser; and if default is made, 
the seller has no right to retake the property; but he may 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 53 

sue and put an attachment on the property for the pur- 
chase price. 

Section 31k.— FORM OF CONDITIONAL AGREE- 
MENT. — The following is a good form of agreement for 
conditional sale of personal property: — 

San Francisco, CaL, , 190. .. 

I promise to pay to the order of 

, Dollars, at 

, Cai., as rent for 

(Here describe property.) 

as follows : Dollars before delivery 

of said property to me, and Dol- 
lars per month on the day of each and every 

month thereafter, commencing on the 

day of 190. ., with interest on 

the amount unpaid at the rate of per cent per 

annum, payable monthly. 

I acknowledge the receipt of said property, and agree that 
I will keep the same in good order, and that it shall not be 

removed from No Street, 

in the City of , without the 

written consent of said 

, and do also agree that until the sum of 

Dollars with interest, as aforesaid, 

is fully paid, said property is the property of said 

. , and that I have no 

right to dispose thereof ; but when the total sum of 

Dollars and interest has been paid, and 

not until then, I shall receive a bill of sale and the title to 
said property shall vest in me. 

I also agree that if I fail to pay any of said installment? 
when due, or perform any of the aforesaid conditions, or 
said property be attached or levied upon, all of said sum of 

Dollars shall in any of said 

cases immediately become due and payable, and 

may enforce pay- 
ment of the entire sum then unpaid and interest thereon ; 
or may, if he so elect, rescind this executory contract and 
take possession, without legal process, of said property, and 
for that purpose may enter any premises where the same 



54 busine:ss laws for busini:ss men. 

may be (all damages for said entry being hereby expressly 

waived) ; and thereupon, if said 

shall elect to rescind, and shall retake said 

property, they shall refund the money paid by me, if any 
remains, after deducting a rental for use of said property 

of Dollars per month, expenses of 

taking possession and removal, and twenty per cent of total 
sum to be paid for liquidated and assessed damages, which 
rental, expenses, and damages I promise and agree to pay 

said Said 

rental dating from delivery of said property to me. 

In all matters herein mentioned, time is declared to be 
the essence of this contract. 



Stoppage in Transit 

Section 32.— WHEN SELLER OR CONSIGNOR MAY 
STOP GOODS IN TRANSIT.— A seller or consignor of 
goods, whose claim for the price has not been paid, may 
stop the goods while on their way to the buyer or con- 
signee, and may take possession of the goods. He may 
do this whenever it becomes known to him, after parting 
with the property, that the buyer or consignee is insolvent. 
A person is insolvent, in the meaning of the law, when he 
ceases to pay his debts in the manner usual with persons 
of his business, or when he declares his inability or un- 
willingness to pay his debts. The property can be stopped 
only by notice to the carrier or holder of the goods, or by 
taking actual possession of the goods. As the taking of 
actual possession will be ordinarily impossible, where the 
goods are on the way to the buyer or consignee on board 
cars or vessels, a notice to the carrier not to deliver the 
goods will be sufficient to stop them ; and if the carrier, 
notwithstanding such notice, delivers the goods to the 
buyer or consignee, the carrier will be liable to the seller 
or consignor in damages. The property can only be 
stopped while in transit. The transit of property is at an 
end when it comes into the possession of the consignee, 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 55 

or into the possession of his agent to receive it. There- 
fore, if the seller, after shipping the goods, discovers that 
the consignee is insolvent (that he has ceased to pay his 
debts in the usual manner, or has declared his inability 
or unwillingness to pay his debts), he must act promptly 
in order to stop the goods, and must give notice to the 
carrier not to make delivery. The sale of the goods is 
not rescinded by stopping them in transit. The seller 
simply resumes his vendor's lien for the price of the goods, 
and, if the consignee comes forward and pays the sum due 
on the purchase price, the goods must be released and 
allowed to proceed on their way. The seller, by stopping 
the goods in transit, does not become again the owner. 
He has parted with the title, but he again comes into pos- 
session, and holds the goods for the unpaid price. The 
carrier, after notice to stop, must deliver the goods to the 
vendor, and the vendor will then hold the property until 
the expiration of the credit given, and may then proceed to 
give notice and sell them again. 

Civil Code, Sections 3076, 3077, 3078, 3079, 3080. 

Section 33.— RESALE OF PERSONAL PROPERTY. 

— There has been some controversy in the courts as to the 
manner of reselling personal property held under a ven- 
dor's lien, but the safer method is to give written notice 
to the vendee, and publish notice to the public, of the time 
and place of sale, and then to sell the goods at public 
auction.- No particular form of notice need be employed, 
as any words or form will be sufficient which describes 
the goods, the time and place of sale, and the manner and 
terms of the sale. 

Section 34.— WHAT WILL DEFEAT VENDOR'S 
RIGHT TO STOP GOODS.— The right of stoppage in 
transit belongs only to one occupying in some way the 
relation of vendor toward the consignee of the goods. 
And where the goods are transferred by the vendee to a 



56 • BUSINESS LAWS FOR BUSINESS MEN. 

bona fide purchaser for value, this will defeat the vendor's 
right to stop the goods. Where the buyer has possession 
of the bill of lading, with the consent of the seller, and 
indorses it to a bona fide purchaser of the goods, — to one 
who has no notice of the seller's claim or the buyer's in- 
solvency, and who pays value for the goods, — this will de- 
feat the right to stop the goods. The consignee may inter- 
cept the goods on the way, and take possession of them 
at a different station or place from that of their destina- 
tion, and the consignor's right of stoppage will be lost. 

Warranty of Personal Property- 
Section 35.— WARRANTY OF TITLE.— A warranty is 
an engagement ' by which a seller assures to a buyer the 
existence of some fact affecting the transaction, whether 
past, present, or future. A warranty of the character, con- 
dition, or quality of personal property arises from con- 
tract, either express or implied. The parties may expressly 
state the warranty they agree upon, or a warranty may 
arise by reason of some obligation which the law imposes 
upon the parties or the circumstances. One who sells per- 
sonal property as his own thereby warrants that he has 
a good and unencumbered title to the property. The law 
implies this warranty from the fact of sale. 
Civil Code, Section 1765. 

Section 36.^WARRANTY ON SALE BY SAMPLE. 

— One who sells or agrees to sell goods by sample thereby 
warrants the quality of the bulk to be equal to that of the 
sample. Where goods are sold by sample, and the articles 
are inferior to the sample shown, the purchaser is not bound 
to accept the goods, for that would be to force upon him 
goods of a different quality from that which he bargained 
for. 

Civil Code, Section 1766. 



BUSINE:vSS contracts and legal obligations. 01 

Section 37.— WARRANTY ON AGREEMENT TO 
SELL MERCHANDISE NOT IN EXISTENCE.— A 

person may agree to sell merchandise not then in existence, 
but he thereby warrants that it shall be sound and mer- 
chantable at the place of production contemplated by the 
parties ; and the seller also warrants that such inerchandise, 
when delivered, shall be as nearly sound and merchantable 
at the place of delivery as can be secured by reasonable 
care. 

Civil Code, Section 1768. 

Section 38. — MANUFACTURER'S WARRANTY 
AGAINST DEFECTS.— One who sells or agrees to sell 
an article of his own manufacture thereby warrants it to 
be free from any latent defect, not disclosed to the buyer, 
arising from the process of manufacture ; and also that 
neither he nor his agent in such manufacture has know- 
ingly used improper materials therein; and one who manu- 
factures an article, under an order for a particular purpose, 
warrants by the sale that it is reasonably fit for that pur- 
pose ; so, if it turns out either that the article manufactured 
is defective, which defect was not apparent or disclosed 
to the buyer, or that the article is not reasonably fit for 
the purpose for which it was ordered, the buyer has the 
right to rescind the sale, by returning or offering to return 
the article to the manufacturer. 

f^ivil Code, Sections 1769, 1770. 

Section 39.— WARRANTY OF SOUNDNESS.— One 
who sells or agrees to sell merchandise not open to the ex- 
amination of the buyer thereb)^ warrants that such mer- 
chandise is sound and merchantable. 

Section 40.— WARRANTY BY TRADE-MARKS AND 
OTHER MARKS.— One who sells any article to which 
there is affixed a trade-mark thereby warrants it to be 
genuine and lawfully used. And one who sells anv article 



58 busine:ss laws for business me:n. 

with a statement or mark upon it, or attached to it, ex- 
pressing the quantity or quaHty of the article, or stating 
the place where it was manufactured, thereby warrants the 
truth of such representations. 

Civil Code, Sections 1772, 1773. 

Section 41.— WARRANTY OF PROVISIONS FOR 
DOMESTIC USE. — By a sale of provisions for domestic 
use, for immediate consumption, there is a warranty that 
the provisions are sound and wholesome. 
Civil Code, Section 1775. 

Section 42.— WARRANTY ON SALE OF GOOD 
WILL OF BUSINESS.— One who sells the good will of 
a business thereby warrants that he will not endeavor to 
draw off any of the customers. 

Civil Code, Section 1776. 

Auction Sales 

Section 43.— AUTHORITY OF AUCTIONEER.— A 

sale by auction is a sale by public outcry to the highest 
bidder on the spot. Laws have been passed by the Legis- 
lature of California to regulate the authority of auctioneers, 
and the rights of bidders, and the manner of conducting 
auction sales. An auctioneer, by the law of California, 
without special authorization, has authority from the seller 
only to the extent that he may sell by public auction to 
the highest bidder; to sell for cash only, except such arti- 
cles as are usually sold on credit at auction ; to warrant the 
title of his principal to personal property sold by him, and 
the quality and quantity of the property; to prescribe rea- 
sonable rules and terms of sale; to deliver the things sold- 
upon payment of the price ; to collect the price ; and to do 
whatever else is necessary, or proper and usual in the 
ordinary course of business, for effecting these purposes. 
An auctioneer will be deemed to have authority from a 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 59 

bidder at the auction, as well as from the seller, to bind 
both seller and bidder by a memorandum of the contract, 
whenever by law the sale must be evidenced by a memo- 
randum in writing. 

Civil Code, Sections 1792, 2362, 2363. 

Section 44.— WHEN AUCTION SALE IS COM- 
PLETE. — A sale by auction is not complete until the auc- 
tioneer publicly announces, by the fall of his hammer, or 
in some other customary manner, that the thing is sold. 
Civil Code, Section 1793. 

Section 45.— WITHDRAWAL OF BIDS.— Until the 
public announcement necessary to complete the sale is 
made by the auctioneer, any bidder may withdraw his bid. 
The only thing necessary to do in withdrawing a bid is to 
notify the auctioneer that the bid is withdrawn, before the 
final announcement of the sale. 

Civil Code, Section 1794. 

Section 46.— AUCTION SALE UNDER WRITTEN 
CONDITIONS. — Whenever an auction sale is made under 
written or printed conditions, the auctioneer must follow 
such conditions, and has no power to change them by any 
oral declaration, except that he may modify a condition 
intended for his own benefit. 

Civil Code, Section 1795. 

Section 47.— AUCTION SALE WITHOUT RE- 
SERVE. — Public policy requires that auction sales shall 
be conducted with the highest good faith, and that neither 
the auctioneer nor his principal shall be allowed to deceive 
or impose upon the persons who gather at an auction for 
the purpose of making bids. It is therefore provided by 
the law, for the protection of the bidder, that at a sale by 
auction, announced to be without reserve, the highest bid- 
der in good faith has an absolute right to the completion 



no BUSINESS LAWS FOR BUSINESS MEN. 

of the sale to him. Upon such a sale bids by the seller, or 
bids by any agent for him, are absolutely void. The pub- 
lic is interested in securing the advantages of fair and just 
competition among bidders, and in the prevention of favor- 
itism or fraud in any form. The highest bidder in good 
faith, at a sale without reserve, is entitled to the property, 
and, if it should appear that the property was in reality 
knocked down by the auctioneer upon a higher but fraud- 
ulent bid in the interest of the seller, a suit can be main- 
tained in the Superior Court to compel the recognition of 
the rights of the bidder in good faith, and the delivery of 
the property to him upon payment of the amount of his 
bid. 

Civil Code, Section 1796. 

Section 48.— FRAUDS UPON THE BUYER. -Some- 
times the seller, for the purpose of increasing the price of 
the property sold at auction, will employ pufTers to bid up 
the property, thus giving it a fictitious value, and often 
inducing credulous bidders to increase their bids beyond 
what they had any idea of offering. The law provides, 
without any qualification, that the employment of puffers 
at an auction sale by the seller, without the knowledge 
of the buyer, is a fraud upon the buyer, which entitles him 
to rescind his purchase. 

Civil Code, Section 1797. 

Section 49.— AUCTIONEER'S MEMORANDUM OF 
SALE BINDS BOTH PARTIES.— When property is 
sold by auction, an entry made by the auctioneer in his 
sale book, at the time of the sale, giving the names of the 
person for whom he sells and the buyer, and describing the 
thing sold, the price, and the terms of sale, binds both the 
seller and the buyer, in the same manner as though the 
memorandum had been made by themselves. 
Civil Code, Section 1798. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 61 

Deposit of Personal Property 

Section 50.— DEPOSIT FOR SAFE KEEPING.— The 

obligations of one who receives personal property on 
deposit are fixed by statute. When personal property is 
deposited with one for safe keeping, the person receiving 
the deposit is bound to return the identical thing deposited 
with him ; he is bound to use ordinary care in the safe 
keeping of the property, and if, by his gross carelessness 
or neglect, the thing deposited with him is lost or injured, 
he is liable to the depositary for its value. 

Section 51.— DEPOSIT FOR EXCHANGE.— A de- 
posit for exchange is one in which the depositary is bound 
to return to the depositor, not the identical thing deposited, 
but something corresponding in kind to it. Where money 
is received on deposit, or any article which is mingled with 
the depositary's property of a like kind, and not expected 
to be returned to the depositor in the identical thing de- 
posited, the depositor becomes a creditor of the other 
party, to the amount of the money or value of other property 
deposited. 

Civil Code, Sections 1818, 1878. 

Section 52.— OBLIGATIONS OF THE DEPOSI- 
TARY. — The depositary must deliver the property to the 
person for whose benefit it was deposited, on demand, un- 
less he has a lien upon it. He is not bound to deliver the 
property "without a demand being made for it, even where 
the deposit is made for a specified time. A depositary must 
deliver the thing deposited at his residence or place of 
business, as may be most convenient for him. If a thing 
deposited is owned jointly or in common, by persons who 
cannot agree upon the manner of its delivery, the deposi- 
tary may deliver to each his proper share, if this can be 
done without injury to the thing deposited. 

Civil Code, Sections 1822, 1823, 1824, 1827. 



62 busine:ss laws for businkss me:n. 

Section 53.— THINGS WHICH WILL EXCUSE DE- 
LIVERY. — There are some circumstances which will ex- 
cuse delivery, even after demand is made. A third person 
may claim to be the real owner of the property, and estab- 
lish his claim by law; or litigation may ensue between the 
depositor and another person claiming to be the real owner 
of the property, in which the court will enjoin the delivery 
or take the property into its own hands pending the litiga- 
tion. Whenever any proceedings are taken adverse to the 
interest of the depositor, or adverse to the interest of the 
person for whose benefit the deposit was made, the person 
who received the deposit must give prompt notice of such 
proceedings to the depositor or other person beneficially 
interested. The depositary may also acquire a lien upon 
the property, which will excuse delivery; and generally he 
will have a lien upon the property, when he has performed 
services about the property, or incurred expense in its keep- 
ing or preservation, for the value of his services and the 
amount of his expenses. 

Storage of Personal Property 

Section 54. — STORAGE. — Where a person deposits per- 
sonal property with another and agrees to pay him a com- 
pensation, it is called storage. Under this designation is 
included a variety of business transactions wherein one per- 
son takes charge and custody of the goods of another for 
hire. 

Section 55.— CARE TO BE TAKEN OF THING DE- 
POSITED. — One who takes goods on storage for hire must 
use at least ordinary care for their preservation, and is liable 
for damages by reason of failure to perform his obligation 
in this respect. 

Storage in Warehouses 

Section 56.— -WAREHOUSE RECEIPTS.— The most 
common form of storage known to business is that where 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 63 

the owner of a warehouse receives property on storage for 
a stated compensation. The warehouseman, upon receiv- 
ing the property, must give a receipt for it, which receipt 
must show on its face that a contract for storage has been 
entered into between the owner of the goods and the ware- 
houseman, the latter to store the goods, and the former to 
pay for that service. All warehouse receipts must state 
on their face for what they are issued, the brands and dis- 
tinguishing marks on the property, describing it sufficiently 
for identification, and stating the rate of storage per month 
or season, and, in the case of grain, the kind, and number 
of sacks and pounds. A w^arehouseman cannot issue any 
valid receipt for any merchandise, grain, or other product 
or thing of value, unless the property has actually been 
received by him and is in the warehouse or under his con- 
trol at the time ; and no second warehouse receipt can be 
issued, so long as a former receipt is outstanding and un- 
canceled in whole or in part. A warehouse receipt is a 
negotiable instrument, and may be transferred by indorse- 
ment, and a transfer of the receipt is a good delivery of the 
goods represented by it. But it is only persons who pur- 
sue the calling of warehousemen — that is, receive and store 
goods in a warehouse as a business for profit — that have 
power to issue a technical warehouse receipt, the transfer 
of which will be considered by the law a good delivery of 
the property represented by the receipt. Therefore, such 
a receipt- issued by one who is not in that business for 
profit, even though he receives the goods, will not have 
given to it by law the character of a negotiable instrument. 
In every case where a w^arehouseman receives property in 
a warehouse as a business for profit, the warehouse receipt 
is negotiable, and a transfer of the receipt in good faith, by 
indorsement to another, passes the title to the goods cov- 
ered by the receipt. 

Statutes of 1877-78, pp. 949, 950. 



64 busine:ss laws for business men. 

Section 57.— WHEN WAREHOUSE RECEIPT IS 
NOT NEGOTIABLE.— In California every warehouse 
receipt is negotiable, unless it has the word "non-negotiable" 
printed in red ink, in distinct letters, across its face. When 
the word "non-negotiable" is thus printed across the face 
of the receipt, this operates as a notice of the real character 
of the contract between the warehouseman and the owner 
of the property, and that it was their intention that the 
receipt should not be a negotiable instrument. 
Statutes of 1877-78, pp. 949, 950. 

Section 58.— REMOVAL OF PROPERTY BY WARE- 
HOUSEMAN. — No warehouseman can sell or encumber, 
or ship or remove beyond his control, any property for 
which a receipt has been given by him, without the con- 
sent in writing of the holder of the receipt, and the consent 
of the holder must be plainly indorsed on the receipt in ink. 
Statutes of 1877-78, pp. 949, 950. 

Section 59.— DELIVERY OF PROPERTY BY WARE- 
HOUSEMAN. — If a negotiable receipt has been given, the 
warehouseman must deliver the property to the holder of 
the receipt, properly indorsed. If the receipt issued was 
not negotiable, the warehouseman cannot deliver any part 
of the property, except upon the written order of the per- 
son to whom the receipt was issued. When a negotiable 
warehouse receipt is presented, and a demand made for 
delivery of the property, the warehouseman at the time of 
delivery must indorse on the back of the receipt, in ink, 
the amount and date of the delivery; and the warehouse- 
man will not be allowed to make any offset, claim, or de- 
mand, other than is expressed on the face of the receipt, 
when called upon to deliver any property for which it was 
issued. 

Statutes of 1877-78, pp. 949, 950. 

Section 6o.^LIABILITY OF WAREHOUSEMAN.— 

A warehouseman must use ordinary care and diligence in 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 65 

everything he does about the storage and care of the prop- 
erty, and about its dehvery, and he must strictly follow 
the law of the State, above stated, with reference to re- 
ceipts, etc. If he does not do so, and the property is in- 
jured or destroyed, or is lost to the owner, by reason of 
the violation of the legal obligations on his part, the ware- 
houseman will be liable in a civil suit to the person injured 
for all damages which have been sustained by reason of 
his conduct. The amount of damages which he will be 
liable for will vary with the circumstances. Sometimes it 
will be the market value of the goods only, and sometimes 
peculiar circumstances or conditions will necessitate an- 
other measure of damages. But, whatever the circum- 
stances or conditions surrounding the injury, the ware- 
houseman will be liable to the owner of the property for 
all damages which immediately befell him, or which came 
as a consequence of the warehouseman's unlawful or negli- 
gent acts. The law also makes the issuance of false or 
fictitious receipts, bills of lading, or other vouchers, by a 
warehouseman, for merchandise which has not actually 
been received by him, a felony, punishable by imprison- 
ment in the State Prison not exceeding five years, and by 
a fine not exceeding $i,ooo. 

Statutes of 1877-78, pp. 949, 950; Penal Code, 
Section 578. 

Section 61.— WAREHOUSEMAN'S LIABILITY FOR 
DELiyERING PROPERTY TO WRONG PERSON. 

— A Avarehouseman must use ordinary care and diligence 
to ascertain whether an indorsement is genuine before de- 
livering the property. And if he delivers the property to 
a person who has no right to it, when he might have 
ascertained the truth by the exercise of ordinary care and 
diligence, he will be liable to the owner of the goods. 

Section 62.— WAREHOUSEMAN'S LIABILITY FOR 
LOSS BY FIRE. — No warehouseman is responsible for 

5 



66 BUSINESS LAWS FOR BUSINESS MEN. 

any loss or damage to property by fire while in his custody, 
if he exercises reasonable care and diligence for its protec- 
tion and preservation. If the property in his warehouse 
is destroyed by fire, in order to make him liable for the loss, 
it must be shown that his own neglect was the cause of 
the fire, or that, a fire occurring, he had the opportunity 
to save the property, but neglected to do so, with the means 
at hand. 

Statutes of 1877-78, pp. 949, 950. 

Section 63.— SALE OF PROPERTY FOR STORAGE 
CHARGES. — If no person calls for the property within 
sixty days from the receipt thereof, and pays freight and 
charges thereon, a warehouseman may sell such property, 
or so much thereof as wall pay freight and charges, to the 
highest bidder at public auction, having first caused such 
notice of sale to be given as is customary in sales of goods 
by auction at the place w^here said goods may be held or 
stored. If any surplus is left, after paying freight, storage, 
expenses of sale, and other reasonable charges, the same 
must be paid over to the owmer of such property, upon 
demand being made therefor at any time within sixty days 
after the sale. 

Statutes of 1903, p. 88. 

Hotel Keepers and Lodging-house Keepers 

Section 64.— LIABILITY OF HOTEL KEEPERS 
AND LODGING-HOUSE KEEPERS.— Hotel keepers 
(including boarding-house keepers) and lodging-house 
keepers have certain rights and liabilities fixed by statute. 
The language of the California statute referring to hotels 
is, "Inn keepers, hotel keepers, boarding and lodging house 
keepers." There is no difference in the law between an 
inn and hotel. Both words mean the same thing. An inn 
is a house w-hich is held out to the public as a place where 
all transient persons who come will be received and enter- 
tained as guests, for compensation, — a hotel. There is a 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 07 

difference between a hotel and a boarding-house, which is 
this : A hotel is a house where a keeper holds himself out 
as ready to receive all who may choose to come there and 
pay an adequate price for the entertainment, while the 
keeper of a boarding-house reserves the choice of comers 
and the terms of accommodation, contracting specially with 
each customer, and most commonly arranging for long 
periods and a definite abode. There is no difference in the 
law between the liability of hotel keepers, boarding-house 
keepers, and lodging-house keepers. The law puts them 
all in the same class with reference to their liability for 
the property of their guests, boarders, or lodgers. Hotel 
keepers, boarding-house keepers, and lodging-house keep- 
ers in California are bound to use ordinary care and dili- 
gence in the protection and preservation of the personal 
property, other than money, of their guests, boarders, or 
lodgers coming into their houses ; and they are liable for 
losses of or injuries to such property, if occasioned by their 
lack of ordinary care and diligence. The law passed by 
the Legislature in 1895 limited the liability of hotel keep- 
ers, boarding and lodging house keepers, to losses occa- 
sioned by their lack of ordinary care and diligence, but 
does not include money within its terms ; consequently it 
seems that greater and more exacting care must be taken 
of the money of a guest, boarder, or lodger than is required 
to be exercised with reference to other kinds of personal 
property. The law provides, however, that in no case of 
loss of ^r injury to personal property, other than money, 
shall the liability of the hotel keeper, boarding-house 
keeper, or lodging-house keeper exceed the sum of $100 
for each trunk and its contents, $50 for each valise and 
traveling bag and contents, and $10 for each box, bundle, 
or package and contents, placed under his care, unless he 
has consented in writing with the owner to assume a 
greater liability. It is customary to give receipts in writ- 
ing for money left or deposited by guests, and in such case 



68 BUSINESS LAWS FOR BUSINESS MEN. 

the liability would be for the amount shown by the receipt, 
in case of loss. 

Civil Code, Section 1859. 

Section 65.— EXEMPTION FROM LIABILITY IN 
CERTAIN CASES.— The courts had held hotel keepers 
to such a strict liability that the Legislature was induced, 
in 1895, to pass a law making practically an exemption in 
certain cases, and modifying to a great extent the extreme 
strictness of the law as it then stood in this State. By 
the law passed in 1895, and which is now in force, if a hotel 
keeper, or boarding-house or lodging-house keeper, keeps 
a fireproof safe, and gives notice to his guest, boarder, or 
lodger that he keeps such a safe, and will not be liable for 
money, jewelry, documents, or other articles of unusual 
value and small compass, unless such articles are placed 
in the safe, he will not be liable for any loss or damage 
to such articles if not deposited with him, to be placed in 
his safe, provided, that he does not by his own acts con- 
tribute to the loss of the property. This law also provides 
that, in any case, the hotel keeper, boarding-house keeper, 
or lodging-house keeper shall not be liable for more than 
$250 for the loss of any money, jewelry, or documents, or 
other articles of unusual value and small compass, belong- 
ing to any guest, boarder, or lodger, unless he shall have 
given a receipt in writing for such property. Just what 
the law means by a ''receipt in writing," and how that fact 
alone should make the liability greater, is difficult to under- 
stand ; but it is probable that the Legislature meant to 
provide, by this language, that where a receipt is given 
acknowledging a greater value, then the liability for the loss 
shall be equal to the admitted value of the property, and 
that where no receipt is given, no value in excess of $250 
shall be left to be determined by the conflicting testimony of 
witnesses. The notice provided for in the law need not be 
in any particular form, and it may be given personally to 
the guest, boarder, or lodger, or it may be given by putting 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 69 

np a printed notice in a prominent place in the office or in 
the rooms of the house. 

Civil Code, Section i860. 

Section 66.— WHAT PROPERTY MUST BE DE- 
POSITED IN THE SAFE.— Under the notice provided 
for by the law to be given by the hotel keeper, boarding- 
house keeper, or lodging-house keeper, he cannot demand. 
that his guest put every article of small compass and 
peculiar value, or all his money or jewelry, in the safe. 
The law does not apply to such articles as the guest needs 
to have about him, for constant and daily use, even though 
for personal adornment. Jewelry worn by a woman daily 
need not, when not actually upon her person, be deposited 
in the safe, in order to make the hotel keeper or boarding 
and lodging house keeper responsible for its loss in his 
house. If worn daily, the jewelry does not cease to be 
needed for present personal use when its possessor lays 
it aside upon retiring for the night. Nor is it necessary, 
in order to render the hotel keeper liable, that the property 
should have been delivered into his exclusive personal 
possession. The guest may retain personal possession of 
his goods within the house — as of his trunk and its con- 
tents, his wearing apparel, and other articles in his room, 
and any jewelry or valuables carried or worn around his 
person-^without discharging the keeper of the house from 
responsibility. Therefore the Act of 1895, referred to in 
the preceding section, is not intended to apply, and does 
not apply, to the articles just enumerated, needed by the 
guest for daily use ; for it would be a manifest absurdity 
to require the guest, upon retiring for the night, to leave 
his personal apparel, or anything carried or worn around 
his person, in the house safe. The law only applies to such 
articles as are not needed by the guest for daily use. 



70 BUSINESS LAWS FOR BUSINESS MEN. 

Section 67.— LIABILITY OF HOTEL, BOARDING- 
HOUSE, AND LODGING-HOUSE KEEPERS FOR 
LOSS BY FIRE.— In some of the States of the Union the 
keeper of a hotel is held to be an insurer against loss by 
fire, and is bound to pay for property lost by a fire, no 
matter from what cause occurring. But this extreme view 
is not the law of California. In this State, when a fire 
occurs, and destroys or injures the property of a guest, 
boarder, or lodger, the keeper of the house is not liable to 
pay the damage if he can show that the fire w^as purely 
accidental, and that neither his negligence nor the negli- 
gence of his servants or employees contributed to the loss. 
But if the fire occurs through the negligence of the propri- 
etor, or by the neglect of any of his servants or employees, 
he will be liable for damage to the property of his guests. 
Thus, if a cook or fireman negligently leaves coals or ashes 
containing fire in a position which ignites and destroys the 
house, or if a chambermaid negligently sets fire to the 
furniture of a room, or if a porter or bellboy sent to build 
a fire in the room of a guest sets fire to the house, or if 
a sufficient watch is not kept, or reasonable protection and 
guard against fire is not maintained, the keeper of a hotel, 
boarding-house, or lodging-house will be liable in this State 
for loss by fire. But where the keeper of the house has 
done all that a reasonable man can do to guard against the 
danger from fire, and a fire occurs, without any negligence 
on his own part or on the part of any of his servants or 
employees, he will not be liable. Thus, if a fire starts in 
an adjoining building, or in some other quarter of the town, 
and reaches and sweeps away his own house ; or if a fire 
occurs by reason of lightning, earthquake, or floods, he will 
not be liable for losses to his guests, boarders, or lodgers. 
Indeed, it may be said that it is the law of this State that 
in no case of loss by fire is the keeper of a hotel, boarding- 
house, or lodging-house liable for the property of guests, 
where the fire was purely accidental, and was not occa- 
sioned by anything which reasonable care and prudence 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 7l 

on the part of himself or his servants and employees might 
have avoided or prevented. 

Section 68.— LIABILITY OF HOTEL, BOARDING- 
HOUSE, AND LODGING-HOUSE KEEPERS FOR 
LOSS BY THEFT.— The liability of the keeper of a hotel, 
boarding-house, or lodging-house for losses of the property 
of his guests, boarders, or lodgers, by theft, depends upon 
whether the thieves come from within the house. If the 
property is stolen by some one employed in the house, in 
any capacity, or even by a guest, boarder or lodger, with- 
out the fault of the person from whom the property is 
taken, the keeper of the house Avill be liable for its loss. 
But if burglars or rioters break into the house and steal, 
this will constitute an act which the keeper of the house 
could not very well have had any control over, and hence 
he will not be liable, if he kept his house secured in a rea- 
sonable manner. 

Section 69.— LIABILITY OF HOTEL,* BOARDING- 
HOUSE, AND LODGING-HOUSE KEEPERS FOR 
LOSS OF BAGGAGE.— The liability for loss of baggage 
begins at the moment the hotel, boarding-house, or lodg- 
ing-house keeper takes charge of the baggage, whether at 
the house or elsewhere. Therefore, if a porter solicits a 
guest at a railroad train, or ferry, or depot, and receives 
the traveler's check, and indicates the conveyance which 
the traveler shall take to the house, the keeper is responsi- 
ble from that moment for the safe delivery of the baggage 
at the guest's room, and, if it is lost on the way, the keeper 
of the house is liable. After the baggage has reached the 
house, the keeper is responsible for its safety, and will be 
liable for its loss, if the owner of the baggage is not guilty 
of any negligence which contributes to the loss. After the 
baggage leaves the house, to be taken to a depot, train, 
or ferry by the employees of the keeper of the house, his 



72 BUSINESS LAWS FOR BUSINESS MEN. 

liability continues until the baggage safely reaches its 
destination there. 

Section 70.— LIEN OF HOTEL, BOARDING-HOUSE, 
AND LODGING-HOUSE KEEPER ON BAGGAGE 
AND OTHER PROPERTY.— A hotel, boarding-house, 
or lodging-house keeper has a lien upon the baggage and 
other property of his guest, boarder, or lodger, brought 
into his house, for the compensation due him. This lien 
includes his charges for accommodation, board, and lodg- 
ing, and room rent, and such extras as have been requested 
and furnished. If the bill is not paid when due, the keeper 
of a hotel, boarding-house, or lodging-house has the right 
to take possession of the baggage and other personal prop- 
erty of the guest, boarder, or lodger, in the house, and keep 
possession until the debt is paid. 
Civil Code, Section 1861. 

Section 71.— SALE OF UNCLAIMED BAGGAGE 
BY HOTEL, BOARDING-HOUSE, AND LODGING- 
HOUSE KEEPERS.— Whenever any trunk, carpet-bag, 
valise, box, bundle, or other baggage, in the possession of 
a hotel, boarding-house, or lodging-house keeper, remains 
there unclaimed for the period of sixty days, the property 
may be sold by him at public auction, and out of the pro- 
ceeds of the sale he may retain the charges for storage and 
the expenses of advertising and sale. A notice of at least 
four weeks, that the property will be sold at auction, must 
be published in a newspaper. If there is no newspaper in 
the place where the house is located, then the notice must 
be published in a newspaper printed at the nearest city or 
town. The notice of the sale must De published once a 
AV€ek for four successive weeks, and the notice must con- 
tain a description of each trunk, carpet-bag, valise, box, 
bundle, or other baggage, which it is intended to sell, also 
the name of the owner, if known, the name of the person 
selling, and the time and place of the sale. If there is any 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. th 

balance left, after retaining enough to pay storage charges 
and the expenses of the sale, and this balance is not claimed 
by the rightful owner within one week from the day of 
sale, the money must be paid into the Treasurer's office 
of the county where the sale takes place ; and if no claim is 
made upon the County Treasurer for the money within 
one year, it goes into the County General Fund. 
Civil Code, Section 1862. 

Section 72.— STATEMENT OF CHARGES, ETC., TO 
BE POSTED BY HOTEL, BOARDING-HOUSE, AND 
LODGING-HOUSE KEEPERS.— A statement of charges 
is required by the law to be posted in every hotel, boarding- 
house, and lodging-house in this State. The Civil Code, 
Section 1863, is as follows: ''Every keeper of a hotel, inn, 
boarding or lodging house shall post, in a conspicuous 
place, in the office or public room, and in every bedroom 
of said hotel, boarding-house, inn, or lodging-house, a 
printed copy of this section, and a statement of charges, 
or rate of charges, by the day, and for meals or items fur- 
nished, and for kdging. No charge or sum shall be col- 
lected or receive^ by any such person for any service not 
actually renderei.l, or for any item not actually delivered, 
or for any greater or other sum than he is entitled to by 
the general rules and regulations of said hotel, inn, board- 
ing or lodging house. For any violation of this section, or 
any provision herein contained, the offender shall forfeit 
10 the injured party three times the amount of the sum 
charged in excess of what he is entitled to." 

Section 72a.— DEFRAUDING HOTEL KEEPERS.- 

Any person who obtains any food or accommodation at a 
hotel, inn, restaurant, boarding-house, or lodging-house 
Vvdlhout paying therefor, with intent to defraud the pro- 
prietor or manager thereof, or who obtains credit at a 
hotel, inn, restaurant, boarding-house, or lodging-house by 
the use of any false pretense, or who, after obtaining credit 



74 busine:ss laws for busine:ss men. 

or accommodation at a hotel, inn. restaurant, boarding- 
house, or lodging-house, absconds, or surreptitiously re- 
moves his baggage therefrom without paying for his food 
or accommodations, is guilty of a misdemeanor. If a per- 
son is convicted of this offense, he is punishable by im- 
prisonment in the County Jail not exceeding six months, 
or by fine not exceeding $500, or by both fine and imprison- 
ment. 

Statutes of 1903, p. 22\ Penal Code, Section 19. 

Landlord and Tenant 

Section 73.— LEASES OF REAL ESTATE.— The Legis- 
lature of California has passed laws regulating by statute 
the making of leases of real estate. It is the policy of this 
State to discourage long leases, which have the effect of 
tying tip property for many years, and therefore the law 
prescribes the longest terms for which real estate may be 
leased in California, and the courts have sustained these 
regulations as being wise and prudent. 

Section 74.— FOR Vv^HAT TERM LEASES MAY BE 
MADE IN CALIFORNIA.— A lease of land for agricul- 
tural purposes, in which is reserved to the owner any rent 
or service of any kind, can be made for ten years, and no 
longer. A lease of a town or city lot, in which is reserved 
to the owner any rent or service of any kind, can be made 
for fifty years, and no longer; provided, that the propert}^ 
of any municipality, or any mmor or incompetent person, 
cannot be leased for a longer period than ten years. 
Statutes of 1903, p. 274. 

Section 75.— WHEN VERBAL LEASE MAY BE 
MADE. — A lease for a term not exceeding one year may 
be made verbally, and need not be witnessed by any writ- 
ing whatever. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 75 

Section 76.— WHEN LEASE MUST BE IN WRITING. 

■ — A lease for a term longer than one year must be in writing. 

Section 77.— FORM OF LEASE.— A lease is not re- 
quired to be in an}^ particular form, so long as it can be 
ascertained from its terms what property is leased, the 
rent reserved, and the term for which the lease is made. 
The lease must be signed by the parties, of course, but it 
is not required to be acknowledged. Without acknowledg- 
ment before a Notary, and without recording, a lease is 
good between the parties to it. But, as the rights of 
creditors, and other claims of third parties, may involve 
the property in litigation, it is alv/ays safest and best to 
acknowledge and record a lease, as in this manner a binding 
notice of the execution and terms of the lease is given to 
the world. Following is a form of lease for common use 
in California : — 

THIS INDENTURE, made the day of 

, 190. ., witnesseth : — 

That I, , of 

the County of , State of California, 

lessor, do hereby lease, demise, and let unto 

, of the same place, lessee, the follow- 

mg described real estate situate, lying, and being in the 

County of , vState of California, and 

particularly described as follows, to-wit : 

(Here insert description of property.) 

To have^and to hold, for the term of years, to-wit : 

from the day of , 190 .. , 

to the day of , 190 .. , 

yielding and paying therefor the rent of 

Dollars, Gold Coin of the United States 

of America; and the said lessee promises to pay the said 
rent in such Gold Coin, at and in the following times and 

installments, namely, Dollars on the 

day of , 190 .. , 

Dollars on the day of , 

190. . , and Dollars on the 

day of , 190. . 



76 BUSINESS LAWS FOR BUSINESS MEN. 

(Or, in place of above, insert for monthly payments, as 
follows : In such Gold Coin, as follows, to-wit : the sum of 

Dollars per month, monthly in 

advance, on the day of each and every month 

during said term.) 

And the said lessee promises to quit and deliver up the 
premises to the lessor or his agent or attorney, peaceably 
and quietly, at the end of the term, in as good order and 
condition (reasonable use and wear thereof, and damages 
by the elements excepted) as the same are now or may be 
put into, and to pay the rent as above stated during the 
term, and not make or suffer any waste thereof, nor lease, 
nor underlet, nor permit any other person or persons to 
occupy or improve the same, or make, or sufifer to be made, 
any alteration therein, without the consent of the lessor 
thereto in writing having been first obtained ; and that the 
lessor may enter to view and make improvements, and to 
expel the lessee if he shall fail to pay the rent as aforesaid, 
or make or suffer any waste thereof. 

And should default be made in the payment of any por- 
tion of said rent when due, the said lessor, his agent or 
attorney, may at his option terminate this lease, and re-enter 
and take possession of said property. 

In witness whereof the parties hereto have hereunto set 
their hands and seals the day and year first above written. 

; (Seal.) 

(Seal.) 

Section 78.— WHAT REPAIRS LESSOR MUST 
MAKE. — The lessor of a building intended for the occupa- 
tion of human beings must, unless there is an agreement 
to the contrary, put the building into a condition fit for 
occupation, and keep it in tenantable repair during the term 
of the lease. If the building gets out of repair by the fault 
of the tenant, or in a dangerous condition by reason of the 
tenant's lack of ordinary care, the lessor is not bound to 
make such repairs, but the tenant himself will, be liable 
to make them. 

Civil Code, Sections 1941, 1949. 



BUSINESS CONTRACTS AND LEGAL OBLIGATION^ / / 

Section 79.— WHEN LESSEE MAY MAKE REPAIRS. 
— When dilapidations have been occasioned to a dwelHng 
which the landlord ought to repair, but neglects to do so, 
the tenant may make the repairs himself, provided the cost 
of such repairs is not more than one month's rent of the 
premises; and the tenant may deduct the cost of such re- 
pairs as he is compelieJ ":? make from the rent. But, be- 
fore he can legally make the repairs himself, so as to deduct 
the cost from the rent, he must give reasonable notice to 
the lessor, stating the character of the dilapidations and 
the repairs needed, and that the lessee intends to make the 
repairs if the lessor does not. This notice may be given 
verbally or in writing. If after> such notice the lessor re- 
fuses or neglects to make the repairs, the lessee may vacate 
the premises, in which case he will be discharged from 
further payment of rent, or the performance of the other 
conditions of the lease. The law gives the tenant the 
privilege of vacating the premises in case the landlord neg- 
lects to make the repairs needed, and also authorizes him, 
if he prefers, to remain and make the repairs himself, when 
they do not require an expenditure exceeding one month's 
rent. The law relates only to buildings intended to be 
occupied by human beings, and the Supreme Court of this 
State has intimated in several decisions that the tenant of 
business property has no right to make repairs himself at 
the expense of the landlord, and that the lessor of business 
property is not required by the law to keep the building in 
repair at all. So far as business property is concerned, 
that is, buildings not intended for human habitation, for 
residence, the law leaves the matter of repairs to be deter- 
mined solely by the terms of the agreements in the lease. 
Civil Code, Section 1942. 

Section 80.— TERMINATION OF LEASE.— A lease is 
terminated by the expiration of the term, or by the hap- 
pening of some event which works a forfeiture of the lease, 
or by consent of the parties. A lease is terminated, as 



/8 BUSINESS LAWS FOR BUSINESS MEN. 

a matter of course, at the end of the term. So, too, it is, 
of course, within the power of the parties to agree, before 
the end of the term, for the termination of the lease at 
any time. The lease may provide that, if any condition 
of the lease be broken, as for non-payment of the stipu- 
lated rent at the time agreed upon, or for breach of a cove- 
nant not to assign the lease without the consent of the 
lessor, the lease shall be terminated, and a breach of the 
condition will terminate the lease. 

Section 8i.— RENEWAL OF LEASE.— A lease may 
provide by its terms for its renewal, and the lessee will 
have the right to a renewal of the lease according to the 
agreement. But if the lease gives the privilege of renewal 
for a further term, the lessee must, before the expiration 
of the original term, give the lessor notice that he elects 
to renew the lease ; and if he does not give such notice, his 
right to insist upon the privilege of renewal is lost. If a 
lessee of real property remains in possession after the ex- 
piration of the term, and the lessor accepts rent from him, 
the law presumes that the parties have renewed the con- 
tract on the same terms and for the same time, but not 
exceeding one month, when the rent is payable monthly, 
nor in any case exceeding one year. 
Civil Code, Section 1945. 

Section 82.— TERM OF HIRING WHEN NO LIMIT 
IS FIXED. — By the statute of California it is provided, 
that a hiring of real property, other than lodgings and 
dwelling-houses, in places where there is no custom on the 
subject, is presumed to be for one year from its commence- 
ment, when no limit is fixed to the term by the agreement 
between the parties. The hiring of lodgings or a dwell- 
ing-house for an unspecified term is presumed to have been 
made for such length of time as the parties adopt for the 
estimation of the rent. Thus, a hiring at a monthly rate 
of rent is presumed to be for one month. If there is no 



busine:ss contracts and legal obligations. /V) 

agreement respecting either the length of time or the rent, 
the hiring is presumed to be monthly. 

Civil Code, Sections 1943, 1944. 

Section 83.— WHEN RENT IS PAYABLE.— The law 

provides, that when there is no usage or contract to the 
contrary, rents are payable at the termination of the hold- 
ing, when it does not exceed one year. If the holding is 
by the day, week, month, quarter, or year, rent is payable 
at the termination of the respective periods, as it succes- 
sively becomes due. 

Civil Code, Section 1947. 

Section 84.— NOTICE TO QUIT.— When the term of 
hiring of real property is not specified by the parties, to 
terminate the hiring, one of the parties must give notice 
to the other of his intention to end the hiring. The tenancy 
may be terminated by the landlord giving notice to the 
tenant, in writing, to remove from the premises. The 
notice must specify the time within which the tenant must 
remove from the premises, and must give him a period 
of not less than one month. After this notice has been 
served, and the period specified in the notice has expired 
the landlord may proceed to recover possession, either by 
reentering and taking possession or by a suit in court. 
Three days' notice only is required to be served on a ten- 
ant under a lease for a stated term. If such tenant fails 
to pay the rent agreed upon, the landlord, at any time 
within one year after the rent becomes due, may give three 
days' notice, in writing, requiring the payment of the rent 
within that time; and this notice must also be served on 
any subtenant who may be in possession of any portion 
of the premises. If the tenant has broken some other 
co'i'lition of the lease, the same written notice must be 
served on him, and on subtenants, if there by any, requir- 
ing him to perform the conditions of the lease or sur- 
render the possession of the property. The lease will be 



80 BUSINESS LAWS FOR BUSINESS MEN. 

saved from forfeiture if the rent is paid or other condition 
of the lease performed within three days after service of 
the notice. If the rent is not paid or condition performed 
within three days after service of the notice, the landlord 
may recover possession of the property in a suit for un- 
lawful detainer. 

Civil Code, Sections 789, 1946; Code of Civil Pro- 
cedure, Section 1161. 

Section 85.— HOW NOTICE TO QUIT MUST BE 
SERVED. — The notice to quit must be served either by 
delivering a copy to the tenant personally; or, if he is ab- 
sent from his place of business or residence, by leaving 
a copy of the notice at either place with some person of 
suitable age and discretion, and sending a copy through 
the mail, addressed to the tenant at his place of residence ; 
or if the place of business or residence cannot be ascer- 
tained, or if no person of suitable age and discretion can 
be found at either place, the notice may be served by post- 
ing a copy in a conspicuous place on the premises, and 
delivering a copy to any person found residing there, and 
also sending a copy through the mail addressed to the 
tenant at the place where the property is situated. 
Code of Civil Procedure, Section 1162. 

Section 86.— OPTION TO PURCHASE IN LEASE. 

— The lessor may provide in the lease that the lessee shall 
have the right to purchase the leased premises at some 
time within the term. If the lessee concludes to take ad- 
vantage of the option given him, he must so notify the 
lessor, and tender the purchase price agreed upon in the 
lease. If he notifies the lessor that he will take the prop- 
erty, as provided for in the lease, and tenders the purchase 
price, the lessee will have the right to a deed, and the lessor 
can be compelled to execute his deed to the property. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 81 

Section 87.— TENANT MUST DELIVER NOTICE 
SERVED ON HIM.— Every tenant who receives notice 
of any proceeding to recover the real property occupied 
by him, or its possession, must inform his landlord imme- 
diately, and must also deliver to his landlord the notice 
he received, if in writing; and if the tenant fails to infori]! 
his landlord of any such notice, or to deliver the notice to 
him, if in writing, he Avill be liable to the landlord for all 
damages which he may sustain by reason of his failure 
Civil Code, Section 1949. 

Sale of Real Property 

Section 87a.— TRANSFER BY DEED.— The title to 
real property is transferred from one to another by an 
instrument in writing called a deed. A deed must be 
signed by the vendor, and acknowledged by him before a 
Notary, or other officer having authority to take acknowl- 
edgments, and must be recorded in the ofifice of the County 
Recorder of the county where the land is situated. 

Section 87b.— DEED TO COMMUNITY PROPERTY. 

— Property acquired by husband and wife, during their 
marriage, by their joint efforts, is community property. 
All property acquired during marriage is community prop • 
erty, except property owned by either before marriage, or 
property acquired by either after marriage by gift, will, 
or as ^heir of a deceased person. The husband may sell 
the community property, for an adequate consideration, 
and make a valid deed signed by himself alone. But he 
cannot make a deed of gift of the community property, 
without his wife's consent; nor can he sell the community 
property at all, without the wife's consent, unless he re- 
ceives a fair and reasonable price for the property. Con- 
sidering that there might be, in case of disputes, a great 
variety of opinions as to what is an adequate price for a 
piece of property, the most conservative business men 
6 



82 BUSINi:SS LAWS FOR BUSINESS ME^N. 

always require the wife's signature to the husband's deed 
of community property, even where the law does not 
require it. Her signature can do no harm, and may pre- 
vent costly disputes. There are cases, however, where the 
husband desires to sell community property, and the wife 
refuses to sign the deed. In this case, if the property is 
community property, and if the price paid is the full value 
of the property, the title of the purchaser will be abso- 
lutely good, with the husband's deed alone, without the 
wife's signature. 

Section 87c.— DEED TO SEPARATE PROPERTY.— 

.Either husband or wife has the right to deed his or her 
separate property, without the consent of the other, and 
without the signature of the other to the deed. 

Section Syd.— DEED OF GIFT.— A property considera- 
tion is not necessary to a valid deed in California. A deed 
of gift, for love and affection, may be made by one person 
to another of real property, and the deed will be for a 
consideration which the law recognizes as sufficient and 
will sustain. 

Section Sye.— FORM OF DEED OF GIFT.— The fol- 
lowing is a form of deed of gift, for use in the State of 
California : — 

THIS INDENTURE, made the day of .... 

, 190 .. , between 

, of the County of , State 

of California, the party of the first part, and 

, of the same place, the party of the 

second part, witnesseth : — 

That the said party of the first part, for and in considera- 
tion of the love and affection which the said party of the 
first part has and bears unto the said party of the second 
part, as also for the better maintenance, support, protec- 
tion, and livelihood of the said party of the second part, 
does by these presents give, grant, alien, and confirm unto 
the said party of the second part, and to heirs and 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 83 

assigns forever, all those certain lots, pieces, or parcels of 

land situate, lying, and being in the County of 

, State of California, bounded and particularly 

described as follows, to-wit : 

(Here describe property.) 

Together with all and singular the tenements, heredita- 
ments, and appurtenances thereunto belonging, or in any 
wise appertaining, and the reversion and reversions, re- 
mainder and remainders, rents, issues, and profits thereof. 

To have and to hold, all and singular the said premises, 
together with the appurtenances, unto the said party of the 
second part, heirs and assigns forever. 

In witness whereof, the said party of the first part has 

hereunto set hand and seal the day and year first 

above written. 

...(Seal.) 

STATE OF CALIFORNIA, ) ^^ 
County of Mendocino. ( 

On this day of , A. D. 

one thousand nine hundred and , 

before me, , a 

Notary Public in and for said County 

and State, residing therein, duly commissioned and sworn, 

personally appeared 

, known to me to be the person. . whose 

name subscribed to and who executed the 

within instrument, and acknowledged to me 

that executed the same. 

In witness whereof, I have hereunto set my hand and 

affixed my official seal, at my office in the 

County ^of , the day and year in 

this certificate first above written. 

Notary Public in and for the 

County of , State of 

California. 

Section Syf.— BARGAIN AND SALE DEED.— The 

most common form of transfer of real estate is by bargain 
and sale deed. In such a deed, the true consideration need 
not be stated. If the consideration, for instance, is $500, 



84 BUSINESS LAWS FOR BUSINESS MEN. 

it may be stated in the deed at $i.oo, or any other sum. 
The law presumes that an adequate consideration was 
given, and if that should become a disputed question, the 
law allows proof to be made as to what the consideration 
really was. 

Section Syg.— FORM OF BARGAIN AND SALE 
DEED. — The following is a form of bargain and sale 
deed : — 

THIS INDENTURE, made the day of 

, 190. . , between 

, of the County of , State 

of California, the party of the first part, and 

, of the same place, the party 

of the second part, witnesseth : — 

That the said party of the first part, for and in considera- 
tion of the sum of Dollars, Gold 

Coin of the United States of America, to him in hand paid 
by the said party of the second part, the receipt whereof 
is hereby acknowledged, does by these presents grant, bar- 
gain, sell and convey unto the said party of the second part, 
and to his heirs and assigns forever, all those certain lots, 
pieces, or parcels of land situate, lying, and being in the 

County of , State of California, and bounded 

and particularly described as follows, to-wit : 

(Here describe the land.) 

Together with all and singular the tenements, heredita- 
ments, and appurtenances thereunto belonging, or in any 
wise appertaining, and the reversion and reversions, re- 
mainder and remainders, rents, issues, and profits thereof. 

To have and to hold, all and singular the said premises, 
together with the appurtenances, unto the said party of the 
second part, his heirs and assigns forever. 

In witness whereof, the said party of the first part has 
hereunto set his hand and seal the day and year first above 
written. » 

(Seal.) 

STATE OF CALIFORNIA, ) ^^ 

County of ) 

On this day of , A. D. one thousand nine 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 85 

linndred and , before me, 

, a Notary Public in and for said 

County and State, residing therein, duly commissioned and 

sworn, personally appeared 

, known to me to be the person . . whose 

name subscribed to, and who executed the 

within instrument, and acknowledged to me 

that executed the same. 

IN WITNESS WHEREOF, I have hereunto set my 

hand and affixed my official seal, at my office in the 

County of , the day and 

year in this certificate first above written. 

Notary Public in and for the County 

of , State of California. 

Section Syh.— QUITCLAIM DEED.— It may occur that 
the grantor has some interest in real estate, which he 
wishes to transfer, yet the interest is not so exactly ascer- 
tained as to be capable of definite description. In this 
event, it is usual to make a quitclaim deed, the grantor 
transferring all his right, title, or claim in or to the land, 
and relinquishing all his claim or right, whatever it may 
be, to his grantee. 

Section Syi.— FORM OF QUITCLAIM DEED.— The 

following is a form of quitclaim deed : — 

THIS INDENTURE, made the day of , 

190. . , between , of the County of 

^ , State of California, the party of the 

first part, and , of the 

same place, the party of the second part, witnesseth : — 

That the said party of the first part, for and in considera- 
tion of the sum of Dollars, Gold Coin of 

the United States of America, to in hand paid by 

the said party of the second part, the receipt whereof is 
hereby acknowledg'ed, has remised, released, and forever 
quitclaimed, and by these presents does remise, release, and 
forever quitclaim, unto the said party of the second part, 

and to heirs and assigns, all those certain lots, 

pieces, or parcels of land, situate, lying, and being in the 



86 BUSINi:SS LAWS FOR BUSINESS MEN. 

County of , State of California, and 

bounded and particularly described as follows, to-wit : . . . . 

(Here describe land.) 

Together with all and singular the tenements, heredita- 
ments, and appurtenances thereunto belonging, or in any 
wise appertaining, and the reversion and reversions, re- 
mainder and remainders, rents, issues, and profits thereof. 

To have and to hold, all and singular the said premises, 
together with the appurtenances, unto the said party of the 
second part, heirs and assigns forever. 

In witness whereof, the said party of the first part has 

hereunto set hand and seal the day and year first 

above written. 

(Seal.) 

STATE OF CALIFORNIA, ^ ^^ 

County of \ 

On this day of , A. D. one thousand nine 

hundred and , before me, 

, a Notary Public in and for said County and State, 

residing therein, duly commissioned and sworn, personally 

appeared , known to 

me to be the person. . whose name subscribed 

to and who executed the within instrument and 

acknowledged to me that executed the same. 

IN WITNESS WHEREOF, I have hereunto set my 
hand and afiixed my official seal at my office in the County 

of , the day and year in this certificate 

first above written. 



Notary Public in and for the County of 
State of California. 



Section 87J.— WARRANTY DEED.— The purchaser of 
real estate may insist upon an agreement on the part of 
the seller to defend the title, to secure him in the possession, 
in the event of his possession being invaded or questioned 
by a third person after the sale. The parties to a sale 
of land may lawfully . make an agreement whereby the 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 8/ 

seller will be boimd to defend the title and possession in 
the purchaser. This agreement is evidenced by a war- 
ranty deed, conveying the property, and at the same time 
binding the seller to stand ready to defend the right of 
possession in the purchaser, should it be attacked. 

Section 87k.— FORM OF WARRANTY DEED.— The 

following is a form of warranty deed : — 

THIS INDENTURE, made the day of , 

190. ., between , of the County of 

, State of California, the party of the 

first part, and , 

of the same place, the party of the second part, witness- 
eth :— 

That the said party of the first part, for and in considera- 
tion of the sum of Dollars, Gold Coin 

of the United States of America, the receipt whereof is 
hereby acknowledged, does by these presents grant, bargain, 
sell, and convey unto the said party of the second part, and 

to heirs and assigns forever, all those certain lots, 

pieces, or parcels of land, situate, lying, and being in the 

County of , State of California, and 

bounded and particularly described as follows, to-wit : . . . . 

(Here describe land.) 

Together with all and singular the tenements, heredita- 
ments, and appurtenances thereunto belonging, or in any 
wise appertaining, the reversion and reversions, remainder 
and rem.ainders, rents, issues, and profits thereof. 

To Have and to hold, all and singular, the above men- 
tioned and described premises, together with the appur- 
tenances,, unto the said party of the second part, and to 
heirs and assigns forever. 

And the said party of the first part, and heirs, the 

said premises, in the quiet and peaceable possession of the 

said party of the second part, heirs, and assigns, 

against the said party of the first part, and his heirs, and 
against all and every person or persons whomsoever, law- 
fully claiming or to claim the same, shall and will warrant, 
and by these presents forever defend. 



88 BUSINESS LAWS FOR BUSINESS MEN. 

In witness whereof the said party of the first part has 

hereunto set hand and seal the day and year first 

above written. 

(Seal.) 

STATE OF CALIFORNIA, ) ^^ 

County of \ ^' 

On this day of , A. D. one thousand nine 

hundred and , before me, 

: . ., a Notary Public in and for said County and 

State, residing therein, duly commissioned and sworn, per- 
sonally appeared , 

known to me to be the person. . whose name 

subscribed to, and who executed the within instrument, 

and acknowledged to me that executed 

the same. 

IN WITNESS WHEREOF, I have hereunto set my 
hand and affixed by official seal at my office in the County 

of , the day and year in this certificate 

first above written. 

Notary Public in and for the County of , 

State of California. 

Section 87I.— DEED IN ESCROW.— A deed may be 
deposited by the grantor with a third person, to be deliv- 
ered to the grantee on performance of a condition, to take 
effect when the condition is performed. Thus, a deed 
deposited with a bank, to be delivered to the grantee upon 
the payment of so much money, or a deed placed in the 
hands of a third party, to be delivered to the grantee upon 
the death of the grantor, will take efltect when the money 
is paid, or when the death of the grantor occurs. While 
in the possession of the third person, and subject to the 
condition, the deed is called an escrow. 
Civil Code, Section 1057. 

Section 87m.— EFFECT OF DEED IN ESCROW.— It 

often occurs that a person will make a deed in escrow, 
without sufficient knowledge of the efifect of his act, and 
when, if he knew the law, the deed would not have been 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 89 

made. Many people suppose that a deed can be made, and 
placed in the hands of a third person, to be delivered upon 
the death of the maker, and still be taken out of escrow 
at any time. But this is not the law. On the contrary, 
it is the law of California, that when the owner of land 
makes a deed, and delivers it to another, with instructions 
only to hold without recording until his death, and then 
to deliver it to the grantee, the grantor cannot recall the 
deed, nor alter its provisions, and he has no interest in 
the land left, except a life estate. His deed passes the 
title to the land at once to the grantee, qualified only by 
the right of the grantor to use and occupy the property, 
or take and receive the rents and profits, during his life. 
The person with whom such a deed is left, in escrow, has 
no right to give it back to the grantor, if the latter should 
change his mind about it. The act of the grantor, in 
making such a deed, delivered to a third person in escrow, 
is irrevocable by him, no matter how much he would like 
to take it back, or how deeply he may regret his act. (De- 
cided by the Supreme Court of California, in the case of 
Bury vs. Young, which decision is printed in Volume 98 
of the California Reports, page 446.) 

Section Syn.— DEED CANNOT BE CANCELED.— If 

a deed is made, executed, and acknowledged, and deliv- 
ered, but not recorded, the property cannot be transferred 
back by a redelivery of the deed, or by its cancellation. 
The grantee in such a case must make a deed back to the 
grantor, and both deeds must then be recorded. 
Civil Code, Section 1058. 



Employer and Employee 

Section 88.— CONTRACT OF EMPLOYMENT.— The 

contract of employment is one by which a person, called 
an employer, engages another, called an employee, to do 
something for a compensation. In such a contract there 



90 BUSINESS LAWS FOR BUSINESS MEN. 

is always either an express agreement or an implied agree- 
ment to pay a compensation for the services performed. 
If the agreement between the employer and the employee 
fixes the compensation, the law will not interfere with it; 
but if there is a contract of employment, and no rate of 
compensation is fixed by the parties, then the law will 
imply an obligation on the part of the employer to pay 
what the services performed by the employee were reason- 
ably worth. 

Section 89.— OBLIGATIONS OF THE EMPLOYER. 

— It may be stated generally of the obligations of the em- 
ployer, which he assumes towards the employee, by the 
contract or relation which they mutually enter into, that 
by the law of California the employer is bound to provide 
a safe place and safe appliances and machinery for the 
performance by the employee of his work; that the em- 
ployer is bound to inform the employee of anything within 
his own knowledge which renders the place or appliances 
dangerous, or which increases the ordinary risks of the em- 
ployment, and which knowledge is not equally open to the 
observation of the employee ; that the employer is bound 
to use reasonable care and diligence in the selection of 
competent fellow-servants, and he will be liable to an em- 
ployee for injuries sustained by reason of his negligence 
in hiring incompetent employees to work with him ; that 
the employer must keep in safe condition the premises in 
which his employee works, and must use ordinary care in 
the inspection and repair of such premises, and in the in- 
spection and repair of machinery and appliances used by 
him. Also, the law provides that the employer must in- 
demnify his employee for all that he necessarily expends 
or loses in direct consequence of the discharge of his duties 
or in obedience to the directions of the employer provided 
that an employer is not bound to indemnify his employee 
for losses suffered by the latter in consequence of the 
ordinary risks of the business in which he is employed. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 91 

And an employer mtist in all cases indemnify his employee 
for losses caused by the employer's want of ordinary care, 
provided that the employee's own negligence must not 
contribute to his own injury. 

Section go.— OBLIGATIONS OF THE EMPLOYEE. 

— The law imposes upon the employee the obligation of 
serving his employer in good faith, using ordinary care 
and diligence, and all the skill which he possesses, in serv- 
ing his employer's interests during his employment. The 
employee must substantially comply with all the reason- 
able directions of his employer concerning the service on 
which he is engaged, except where it is impossible or un- 
lawful for him to do so. Everything which the employee 
acquires by virtue of the employment belongs to the 
employer, except the compensation which is due to him 
from the employer. An employee must, on demand, render 
to his employer just accounts of all his transactions in the 
course of his employment, and must render such accounts 
as often as may be reasonable. An employee who has any 
business to transact on his own account, similar to that 
intrusted to him by his employer, must always give the 
latter the preference. An employee who is guilty of gross 
negligence in the performance of his duties is liable to his 
employer for the damage thereby caused to him; and in 
such case the employer is only liable to the employee for 
the value of such services as are properly rendered. 

^ Civil Code, Sections 1978, 1981, 1984, 1985, 1986, 
1988, 1990. 

Section 91.— TERMINATION OF EMPLOYMENT. 

— The employment may be terminated at any time by the 
mutual agreement of the parties. The employment is also 
terminated by the expiration of the term contracted for, 
or by the extinction of its subject, or by the death of the 
employee, or by the legal incapacity of the employee to 
act, as in the case where the employee becomes insane. 



92 BUSINESS LAWS FOR BUSINESS MEN. 

An employment will also be terminated by notice of the 
death of the employer, and by notice of his legal incapacity 
to contract; but there is an exception to this rule in cases 
where the employee has an interest in the subject of the 
employment, as where, by the terms of the contract of em- 
ployment, the employee is to have a part ownership of the 
thing upon which he is employed. An employment having 
no specified term may be ended at the will of either party, 
on notice to the other. The employer may discharge the 
employee for any wilful breach of duty by him in the 
course of his employment, or in case of the habitual neg- 
lect of his duty by the employee, or long-continued inca- 
pacity to do his work; and the employee may quit the 
service of his employer, even though he has contracted for 
a specified term, where the employer is guilty of any walful 
or permanent breach of his obligations to the employee, 
as where the employer fails to provide a safe place to work 
or safe appliances or competent fellow-servants, or in any 
other way wilfully fails to keep the obligations which tKe 
law or his own contract enjoins upon him for the benefit 
of the employee. An employee, dismissed by his employer 
for good cause, is not entitled to any compensation for 
services rendered since the last day upon which a pay- 
ment became due to him under the contract. An employee 
who quits the service of the employer for good cause is 
entitled to a proportionate payment of the compensation 
which he would have received under a full performance of 
the contract, as compared with the portion of the services 
already performed by him. 

Civil Code, Sections 1996, 1997, 1999, 2000, 2001, 
2002, 2003. 

Master and Servant 

Section 92.— WHO IS A SERVANT.— There is a kind 
of employment which is distinguished under the head of 
"Master and Servant," in the law of California, as in the 



busine:ss contracts and lkgal obligations. 98 

law of other countries. The term apphes particularly to 
one who is employed to render personal service to his em- 
ployer, otherwise than in the pursuit of an independent 
calling, and who in such service remains entirely under 
the control and direction of the latter, who is called his 
master. The word ''servant" is not confined by our law 
to persons who are in domestic service, but it includes all 
who are entirely under the direction and control of the 
employer, with no independent choice or business of their 
own, in rendering of personal services of any kind. 

Section 93.— TERM OF HIRING.— A servant is pre- 
sumed to have been hired for such length of time as the 
parties adopt for the estimation of wages. A hiring at a 
yearly rate is presumed to be for one year; a hiring at a 
daily rate, for one day; a hiring by piece-work, for no speci- 
fied term. Custom in a particular employment or a par- 
ticular place may change the case, but if there is no agree- 
ment or custom as to the term of service, the time of 
payment, or rate or value of wages, a servant is presumed 
to be hired by the month, at a monthly rate of reasonable 
wages, to be paid when the services are performed. 
Civil Code, Section 94. 

Section 94.— WHEN SERVANT MAY BE DIS- 
CHARGED. — The laAv is that a master may discharge any 
servant, other than an apprentice, whether engaged for a 
fixed term or not, if he is guilty of misconduct in the course 
of his service, or of gross immorality, though not con- 
nected with his service; or, if being employed about the 
person of the master or in a confidential position, the master 
discovers that the servant has been guilty of misconduct 
before or after the commencement of his services, of such 
a nature that the master, had he known or contemplated 
the facts, would not have employed him. 
Civil Code, Section 2015. 



94 busine:ss laws for business men. 

Principal and Agent 

Section 95.— DEFINITION OF AGENCY.— An agent 
is one who represents another, called the principal, in deal- 
ings with third persons. And as a great part of the busi- 
ness of all communities is transacted through the medium 
of agents, it is proposed in following sections to give the 
law of California applying to the relative rights and obli- 
gations of Principal and Agent in this State. 

Section 96.— KINDS OF AGENCY.— There are two 
kinds of agents, special agents and general agents. An 
agent for a particular transaction is called a special agent, 
because he is appointed Avith special power to do that par- 
ticular thing. A general agent, on the other hand, has a 
general authority conferred upon him to transact business 
of his principal, which includes more than one particular 
act. An agency, when it exists at all, is either actual or 
ostensible. An agency is actual when the agent is really 
employed by the principal. An agency is ostensible when 
the principal intentionally or by want of ordinary care 
causes a third person to believe another, who is not really 
employed by him, to be his agent. 

Civil Code, Sections 2297, 2298, 2299, 2230. 

Section 97.— AUTHORITY OF AGENT.— An agent 
has authority to do whatever his principal might do in the 
business for which he is employed. He has authority to 
do everything necessary or proper and usual, in the ordi- 
nary course of business, for effecting the purpose of his 
agency. But he has only such authority as the principal 
confers upon him, and he will be limited in his authority 
to the particular business for which he is employed. What- 
ever he does within the scope of his employment, necessary 
or proper and usual, in the ordinary course of business, to 
effect the purpose of his agency, will be binding upon his 
principal. His declarations as to the subject of his agency, 



busine:ss contracts and legal obligations. 95 

within the scope of his employment, will bind his principal ; 
as where an agent employed to sell goods makes at the time 
a representation as to their- quantity or quality. 
Civil Code, Sections 2315, 2319, 2320. 

Section 98.— WHAT INCLUDED IN AUTHORITY 
TO SELL PERSONAL PROPERTY.— An authority to 
sell personal property includes authority to warrant the 
title of the principal, and the quality and quantity of the 
property. 

Civil Code, Section 2323. 

Section 99.— WHAT INCLUDED IN AUTHORITY 
TO SELL REAL ESTATE.— An agent's authority to sell 
and convey real property includes authority to give the 
usual covenants of warranty. 

Civil Code, Section 2324. 

Section 100.— AUTHORITY OF AGENT TO RE- 
CEIVE PRICE OF PROPERTY.— A general agent to sell, 
who is intrusted by the principal with the possession of 
the thing sold, has authority to receive the price. A special 
agent to sell has authority to receive the price on delivery 
of the thing sold, but not afterward. But neither a general 
nor a special agent to sell has any authority to receive any- 
thing but money in payment of the price of the thing sold. 
Therefore, if the agent sells property of his principal, and 
accepts part cash and part in something else, the principal 
will not -be bound. 

Civil Code, Sections 2325, 2326. 

Section loi.— AGENT'S POWER TO DISOBEY IN- 
STRUCTIONS. — An agent has power to disobey his in- 
structions in dealing with the subject of the agency, in 
cases where it is clearly for the interest of his principal 
that he should do so, when there is not time to communi- 
cate with the principal. The general rule is, that an agent 
must follow and adhere to the instructions and authority 



96 BUSINESS LAWS FOR BUSINESS MEN. 

he has received from his principal, but under some cir- 
cumstances he may depart from his instructions, and the 
law will justify him, and his principal will be bound. So 
where, from the necessities of the case, without the agent's 
fault or neglect, some sudden and unexpected emergency 
or extraordinary or supervening necessity arises, or some 
unforeseen event happens, which will not admit of delay 
for consultation or communication with the principal, if 
the agent, exercising prudence and sound discretion, in 
good faith adopts the course which seems best to him, 
under all the circumstances as they exist, he will be justified, 
and his acts will bind his principal, though subsequent 
events may demonstrate that some other course w^ould have 
been the better. 

Section 102.— AGENT CANNOT HAVE AUTHOR- 
ITY TO DEFRAUD PRINCIPAL.— An agent can never 
have authority to do any act which is a fraud upon the 
principal, and is known or suspected by the person with 
whom he deals to be fraudulent. The agent must act in 
good faith with his principal, and if he enters into collu- 
sion with another to obtain an advantage over his prin- 
cipal, or to obtain the property of the principal for less 
than it is worth, the courts of this State will be ready to 
give the principal relief against both, by restoring to him 
the property of which he has been defrauded, or, if this 
cannot be done, by giving him damages as compensation. 
Many illustrations might be given. Where an agent in- 
vests money belonging to his principal for the purchase of 
an interest in a syndicate, of which the agent is a member, 
and in which he holds an interest, and which is indebted 
in a large amount, and, to induce the investment, leads the 
principal to believe that he is not a member of the syn- 
dicate, or interested therein, and represents that the prin- 
cipal will not have any calls to pay upon becoming a mem- 
ber thereof, the law imputes fraud on the part of the agent, 
and the principal may avoid the transaction and recover 



BUSINESS CONTRACTS AND LEGAL .OBLIGATIONS. 97 

from the agent the amount so invested. So, it is the law 
of this State, that an agent must not unite his personal 
and his representative characters in the same transaction; 
for the law will not permit him to be exposed to the temp- 
tation, or brought into a situation where his own personal 
interests will conflict with the interests of his principal. 
In dealing without the intervention of his principal, if an 
agent for the purpose of selling property of the principal 
purchases it himself, or an agent for the purpose of buying 
property for the principal buys it from himself, either 
directly or through the instrumentality of a third person, 
the sale or purchase is voidable, and will always be set aside 
at the option of the principal. 

Civil Code, Section 2306. 

Section 103.— AGENT'S ACTUAL AUTHORITY.— 

The actual authority of an agent is such as a principal in- 
tentionally confers upon him, or intentionally or by want 
of ordinary care allows the agent to believe himself to be 
possessed of. An agent's authority is actual when there is 
a contract of employment existing between him and the 
principal. The principal may have given the agent instruc- 
tions to act in a certain way ; or a course of dealings or 
other circumstances between them may have been such as 
to lead the agent to believe that his authority from the 
principal extended to the things done ; or the principal may 
have stood by and without objection witnessed the conduct 
of the agent, and thus made the agent believe that his 
authority from the principal was sufficient to warrant the 
acts done by him; and in all such cases the agent will be 
deemed to have had authority actually given him by the 
principal. 

Civil Code, Sections 2299, 2316. 

Section 104.— AGENT'S OSTENSIBLE AUTHORITY. 

— The ostensible authority of an agent is such as the prin- 
cipal, intentionally or by want of ordinary care, causes or 



98 BUSINESS LAWS FOR BUSINESS MExN. 

allows a third person to believe the agent possesses. There 
are two essential features of an ostensible authority ; the 
third party must believe that the agent has authority; and 
such belief must be generated in his mind by some act or 
neglect of the person whom he seeks to hold liable as 
principal. A belief founded on the agent's statement is 
not sufficient; for a party has no right to take the agent's 
word for the existence of his authority. But where the 
agent shows letters or telegrams, which are worded so as 
to lead a reasonable man to believe that he has received 
authority from the principal to act for him in a certain way ; 
or where the principal has been in the habit of receiving 
money, for shipments of products or goods, through the 
same agent, in similar transactions ; or where the principal 
has been in the habit of honoring drafts signed by the same 
person as his ''agent;" or where similar transactions have 
occurred in which the acts of the alleged agent were author- 
ized or ratified; in all such cases, if the third party knows 
of the former transactions, and has received no notice that 
the principal will not be responsible, he will be justified 
in believing that the agent has authority, and the principal 
will be bound, even though the person for whom the agent 
assumes to act may not have intended to hold him out as 
such agent. On the other hand, a principal is bound by 
acts of his agent, under merely ostensible authority, to 
those persons only who have in good faith, and without 
ordinary negligence, incurred a liability or parted with 
value upon the faith of it. Therefore, if there is anything 
in the circumstances of a transaction, or in the conduct of 
one who represents himself as agent, which ought to 
excite the suspicions or stimulate the inquiry of a reason- 
able man, and the means of inquiry are open to him, and he 
neglects to make such inquiry or investigation as a reason- 
able man under the circumstances should be expected to 
make, the principal will not be liable for the acts of one 
who has no actual authority as agent to act for him. 
Civil Code, Sections 2300, 2334. 



BUSINESS CONTRACTS AND Ll^GAL OBLIGATIONS. 1)1) 

Section 105.— RATIFICATION OF AGENT'S ACTS.— 

A person may ratify the acts of another, done for him as 
his pretended agent, and so make himself hable, though he 
had given the agent no authority before the act was done. 
This ratification may be in many ways. It may be directly, 
by notice to the party with whom the agent has dealt ; or 
it may be by receiving and retaining the fruits of the agent's 
acts ; or it may be by silence and failure to object after being 
fully informed of the facts, for if one is fully informed of 
a contract made by another in his name, and by virtue of 
pretended authority from him, and remains silent and does 
not repudiate the contract within a reasonable time, he is 
presumed to give his consent and acquiescence to the con- 
tract. But a ratification can be made only in the manner 
that would have been necessary to confer an original 
authority for the act ratified ; so where the contract made 
by the agent was one which the law requires to be in 
writing, the ratification of the agent's act must also be in 
writing. 

Civil Code, Section 2310. 

Section 106.— HOW AGENCY IS CREATED.— An 

agency may be created by authority given before the act 
done, and its creation will be presumed from a subsequent 
ratification. The authority conferred upon an agent may 
be verbal, and it will be sufficient for any purpose, except 
that an authority to enter into a contract required by law 
to be in writing can only be given by an instrument in 
w^riting. 

Civil Code, Sections 2307, 2309. 

Section 107.— MUTUAL OBLIGATIONS OF PRINCI- 
PAL AND THIRD PERSONS.— An agent represents his 
principal for all purposes within the scope of his actual or 
ostensible authority, and all the rights and liabilities which 
would accrue to the agent from transactions within such 
limxit, if they had been entered into on his own account, 



L ofC. 



100 busine:ss laws for BusiN:ess me:n. 

accrue to the principal. And the principal is liable, even 
if the agent exceeds his instructions, where the party with 
whom he deals is not aware of it. In either case, the ques- 
tion of the authority of the agent must depend, so far as 
it involves the rights of innocent third persons who have 
relied thereon, upon the character bestowed, and not upon 
the instruction given. Or, in other words, the principal is 
bound to third persons who have relied thereon in good 
faith, and in ignorance of any limitations or restrictions, 
by the apparent authority he has given to the agent, and 
not by the actual or express authority, where that differs 
from the apparent; and this, too, whether the agency be a 
general or special one. 

As against a principal, both principal and agent are 
deemed to have notice of whatever either has notice of, 
and ought in good faith and the exercise of ordinary care 
and diligence to communicate to the other. Notice to the 
agent of a corporation is notice to the corporation itself. 

An instrument within the scope of his authority, by whid' 
an agent intends to bind his principal, does bind him, if 
such intent is plainly inferable from the instrument itself. 

A principal is responsible to third persons for the negli- 
gence of his agent in the transaction of the business of the 
agency, including wrongful acts committed by such agent 
as a part of the transaction of such business, and for the 
agent's wilful omission to fulfil the obligations of the prin- 
cipal. 

Sometimes a person deals with a man without knowing 
or having reason to believe that he is not acting for him- 
self, but is really only the agent for another. In such 
cases, where the fact is afterwards disclosed that another 
is the principal, and the principal makes a claim arising 
out of the contract, the party who dealt with the agent 
may set off against the principal all claims which he might 
have set off against the agent before receiving notice that 
he was an agent. 

An undisclosed principal will be liable when be becomes 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 101 

known, upon a contract made by the agent in his own 
name. Where a party sells goods to one who afterwards 
turns out to have been the agent of another, and the prin- 
cipal receives the benefit of the transaction, the principal 
will be held responsible for the goods furnished the agent. 
But the statute of this State provides, that if exclusive 
credit is given to an agent by the person dealing with him, 
his principal is exonerated by payment made to the agent 
in good faith, before receiving notice of the creditor's 
election to hold the principal responsible. 

Civil Code, Sections 2330, 2331, 2332, 2333, 2334, 
2335. 2336, 2337, 2338. 

Section 108.— OBLIGATIONS OF AGENTS TO 
THIRD PERSONS. — One who assumes to act as an agent 
thereby warrants to all who deal with him in that capacity, 
that he has the authority which he assumes. And if one 
acts as an agent, without authority, the party injured may 
sue him for the breach of the warranty and recover his 
losses. 

If, with the agent's consent, credit is given to him per- 
sonally in a transaction, he will be responsible as a prin- 
cipal to third persons. He will also be personally responsi- 
ble, whenever he enters into a contract in the name of his 
principal, without believing, in good faith, that he has 
authority to do so. He will also be responsible when his 
acts are wrongful in their nature. If an agent receives 
anything for the benefit of his principal, to the possession 
of which another person is entitled, he must, on demand, 
surrender it to such person, or so much of it as he has 
under his control at the time of the demand, on being 
indemnified for any advances which he has made to his 
principal, in good faith, on account of the same ; and he is 
responsible therefor, if, after notice from the owner, he 
delivers it to his principal. 

Civil Code, Sections 2342, 2343, 2344. 



102 BUSINESS LAWS FOR BUSINESS MEN. 

Section 109.— AGENT'S DELEGATION OF HIS 

POWER. — An agent, unless specially forbidden by his 
principal to do so, can delegate his power to another person 
in any of the following cases, and in no others: (i) When 
the act to be done is purely mechanical; (2) when it is 
such as the agent cannot himself, and the sub-agent can, 
lawfully perform ; (3) w^hen it is the usage of the place to 
delegate such powders ; or, (4) when such delegation is 
specially avithorized by the principal. 

A sub-agent represents the principal in like manner with 
the original agent ; and the original agent is not responsible 
to third persons for the acts of the sub-agent. Of course, 
if the agent should without lawful authority appoint a sub- 
agent, he would be responsible to third persons for such 
sub-agent's acts. 

^Civil Code, Sections 2349, 2351. 

Section no.— TERMINATION OF AGENCY.— An 

agency is terminated, as to every person having notice, by 
the expiration of its term. It is also terminated by. the 
extinction of its subject, as where an agent to sell certain 
goods disposes of all of them, or where the subject of the 
agency is lost or destroyed so that nothing more can be 
done about it. It is also terminated by the death of the 
agent. It is also terminated by the agent's renunciation 
of the agency. It is also terminated by the incapacity of 
the agent to act as such, as where the agent becomes 
insane, or from some other cause it becomes impossible 
for the agent to perform his duties. It is also terminated 
when revoked by the principal, or by the principal's death, 
or by the principal's incapacity to act; but there is an 
exception to the rule that an agency is thus terminated 
because of the revocation by death or incapacity of the 
principal, in cases where the agent has acquired from his 
principal an interest in the thing which is the subject of 
the agency; for such an interest may survive all of these 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 103 

events, and be binding upon the principal's heirs, adminis- 
trators, and executors, so as to continue tlie agency in 
existence. The interest which will keep alive the agency, 
under such conditions, must not be a mere lien for com- 
pensation or commissions, but must be an interest in the 
property or other subject of the agency. 
Civil Code, Sections 2355, 2356. 

Wholesaler's Agents 

Section 1 11.— TRAVELING AGENTS.— In modern 
business enterprise the employment of traveling agents by 
wdiolesale houses is adopted as one of the necessary means 
of obtaining or keeping trade. The same ordinary rules 
which apply to the agents of other men apply to the agents 
employed by wholesalers, except when varied by custom 
or usage in a particular business or locality. 

Section 112.— SALE BY SAMPLE.— The agent of a 
wholesaler w^ho carries samples with him, when he exhibits 
the samples to the customer, and solicits his order for the 
goods, warrants that the bulk will be equal to that of the 
sample. This is absolutely necessary as a rule of law, as 
well as the custom among merchants. 

Section 113.— PURCHASER'S RIGHT TO RETURN 

GOODS. — The purchaser of goods sold by sample has a 
right to make reasonable inspection of the goods, and if 
the bulk is not equal to the sample, he may repudiate the 
sale and return the goods. But his inspection and objec- 
tion must be reasonable. If he keeps the goods, unpacked 
and unopened, for a long time after he receives them, his 
inspection will not be reasonable; and if, after inspection, 
he uses a part of the goods himself, or disposes of a part 
to others, or delays in sending them back to the whole- 
saler, his right to avoid liability for the purchase price will 
be lost. He must act promptly in inspectmg the goods. 



104 BUSINESS LAWS I^OR BUSINESS MEN. 

and must with equal promptness return them, if he does 
not wish to be held for them. 

Section 114.— COLLECTIONS BY TRAVELING 
AGENT. — A commercial traveler who makes collections 
for his house cannot, without special authority from the 
house, accept anything but money from the debtor. 

Section 115.— GIVING CREDIT.— A commercial trav- 
eler may sell goods on credit, where that is the usage or 
custom of the place or business ; and when a customer buys 
on credit from a wholesaler's agent, in accordance with 
a usage between them of long standing, and without notice 
of any change in the wholesaler's terms, the latter will 
be bound, even if he has instructed his agent to give no 
more credit. 

Section 116.— DECLARATIONS OF WHOLESAL- 
ER'S AGENT. — When a commercial traveler approaches 
a customer, with or without samples of his principal's 
goods, he stands in the place of the principal and acts for 
and in his behalf. As the principal's own declarations 
would bind him, if he were present, so the agent's declara- 
tions within the scope of his authority, made at the time 
of the sale, and relating to the goods, will be binding upon 
the principal. So, whatever the agent of a wholesaler 
who is sent out to sell the goods of his principal states, 
as to the quantity, or quality, or condition, or price, or 
the time and manner of shipment, or any other fact which 
is material to or an inducement for the sale, it will bind 
the principal as though he had made the representations 
in person. 

Section 117.— NOTICE TO WHOLESALER'S 
AGENT. — Notice of a fact given to the agent is notice to 
the wholesaler. Therefore, if the purchaser gives notice 
to the agent of any fact with respect to the contract or the 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 105 

goods, it is notice to the wholesaler himself, and he will 
be boimd by it. 

Section ii8.— FAILURE TO SHIP GOODS.— When a 

commercial agent solicits and receives an order for goods, 
and neglects to send the order to his house, or the principal 
refuses to honor the order, after receiving it, the wholesaler 
will be liable to the customer for all damages sustained 
by him, if the goods were ordered in good faith. 

Section 119.— NOTICE BY WHOLESALER OF 
TERMINATION OF AGENCY.— A wholesaler must give 
notice to his customers of the termination of an agent's 
authority, or he w^ill be bound by the agent's contracts w^ith 
persons from whom he has formerly solicited orders, even 
if made after the agent's authority has actually ceased. 
Where a wholesaler dismisses an agent from his employ, 
and revokes his authority to sell or buy, he must give 
notice to third parties with whom the agent has dealings ; 
and if he does not give notice to third parties of his revo- 
cation of the agent's authority, or unless he does what he 
can to make the revocation as notorious and generally 
known to the world as w^as the fact of the agency, he will 
be bound by the further dealings of the agent with persons 
who have not received notice of the agent's dismissal. 
As to the method of giving notice that an agent's authority 
has been revoked, or as to the character of notice required, 
the law does not prescribe any particular form of notice 
or method of giving it. Much will depend, in this matter, 
upon the prevailing custom or usage. Sometimes the 
notice is given by publishing in a newspaper, but more 
often by circular letter mailed to each of the wholesaler's 
customers. The latter method is to be preferred ; for the 
wholesaler's books will usually show the names and ad- 
dresses of all persons with whom the agent has had deal- 
ings, and a notice by mail may more surely reach the 
person intended to be notified of the revocation of an 



106 BUSINESS LAWS FOR BUSINESS MEN. 

agent's authority. But whatever may be the method pur- 
sued, it mtist not be forgotten that actual notice of an 
agent's dismissal is necessary to protect his former prin- 
cipal from being bound by the agent's further dealing with 
persons with whom he formerly dealt. 

Section 120.— WHOLESALER'S REPUDIATION OF 
AGENCY. — Circumstances occur where the wholesaler 
will dispute the agency altogether, and seek to repudiate 
the acts of one who has assumed to represent him in a 
transaction. In such cases, if the wholesaler does any- 
thing himself to ratify the act of the assumed agent, or 
accepts the result of his services, or acknowledges in any 
way his capacity as agent for himself, he will be bound, 
and his effort to repudiate the transaction will be of no 
avail. A repudiation of the act of one who assumes to 
act as agent, and whose agency is disputed, must be made 
promptly, as soon as the wholesaler learns of the pretended 
agency, and must be decisive and unequivocal. There was 
a case in Colusa County, which was passed upon by 
the Supreme Court of California in 1896, which illus- 
trates very well the conduct which will bind a wholesaler, 
and what will not be considered a repudiation of an as- 
sumed agent's authority. A man named Willis, who rep- 
resented himself as the agent of J. K. Armsby Co., San 
Francisco, made a contract with J. H. Pope, of Colusa 
County, for the purchase of a lot of green fruit. The con- 
tract was in writing, and was signed, "]. K. Armsby Com- 
pany. By Frank W. Willis, Agent." Subsequently, and 
before the delivery of any fruit under the contract, Pope 
wrote to the J. K. Armsby Co. this letter: ''Colusa, Cab, 
May 25, 1894. J. K. Armsby Co., San Francisco — Gentle- 
men : I have sold my green fruit to you, and have a contract 
signed to that effect, signed, 'J. K. Armsby Company,' by 
Frank Willis, as agent. Now, what I want to know, is 
F. W. Willis your agent for buying green fruit, and is 
the contract correct? Your immediate answer and oblis:e 



BUSLNESS CONTRACTS AND LEGAL OBLIGATIONS. 107 

Yours truly, J. H. Pope." On the next day Pope received 
from the general manager of the Company this letter: "San 
Francisco, May 26, 1894. John H. Pope, Esq., Colusa, 
Cal. — Dear Sir: We have yours of the 25th. Mr. Willis 
bought some apricots on our advice, but we are not aware 
he bought them in our name. We will handle them, how- 
ever, and think there is no question on the money part of 
the transaction. The writer expects to visit your section 
within the next week or two, and will arrange the matter 
satisfactorily with you then. Yours truly, J. K. Armsby 
Co. Freeman." Afterwards a dispute arose, and the J. 
K. Armsby Company denied that Willis was their agent 
for buying the fruit, and claimed to have repudiated his 
agency. But the Supreme Court reviewed the facts, and 
said that the letter from the Company was not frank, and 
did not answer the question put by Pope, whether Willis 
was the Company's agent in the premises, by saying, in 
terms, whether he was or was not such agent; that the 
language used in the letter, and the assurances conveyed 
by it, authorized but one inference, that the contract was 
all right and the Company would see it carried out. And 
the Supreme Court further said, that if the Company in- 
tended to repudiate the transaction, it was its duty to do 
so explicitly, and in such terms as to leave no room for 
doubt; and that Pope had a right to infer from the lan- 
guage of the letter that the contract made by Willis, in- 
stead of being repudiated, was in fact ratified by the J. K. 
Armsby Company; and that the Company was positively 
and plainly informed by Pope's letter that he had a written 
contract signed in its name, and it was clearly the duty of 
the Company, if it did not know the terms of the contract, 
to inform itself, before writing as it did, if it did not wish 
to be bound by the contract. It would have been a very 
easy thing to have asked Pope to send a copy of the con- 
tract, before replying to his letter; and not to have taken 
this simple precaution was negligence on the Company's 



108 • busine:ss laws i^or busine:ss men. 

part, and precluded it from denying the effect of its assur- 
ances to Pope, which induced the latter to proceed and 
deliver his fruit under what he had a right to suppose was 
a valid contract. The case just referred to, like a great 
many others of like character, exemplifies the rule that 
an attempted repudiation of agency, or the contract of an 
agent made in the name of the principal, must be unequivo- 
cal and plain and clear, and must leave no room for a con- 
trary inference on the part of the person with whom the 
agent deals. (Decided by the Supreme Court of Califor- 
nia in the case of Pope vs. Armsby Co., reported in Volume 
III, California Reports, page 159.) 

Manufacturer's Agents 

Section 121.— MANUFACTURER'S AGENT TO BUY 
OR SELL. — The law which applies generally to agents is 
also applicable to agents for manufacturers, whether such 
agents have the authority to buy raw material or to sell 
the finished product to the retailer. The agent for the 
manufacturer has such authority as his principal gives him, 
or such as may be reasonably inferred from a course of 
dealing with customers of which the manufacturer has 
knowledge and retains the benefits. 

Section 122.— AGENT'S AUTHORITY TO BORROW 
MONEY. — Where a manufacturer establishes an agency 
in a city other than the place where the factory or the main 
office is located, the question sometimes arises as to what 
conditions or circumstances, if any, will justify the agent 
in borrowing money on his principal's account. The au- 
thority of an agent to borrow money for his principal 
may be expressly given, or it may be impliedly conferred 
upon him as an incident to the business whirh he under- 
takes to transact for his principal. When the power to 
borrow money is expressly given to an agent, the existence 
and extent of the power are, of course, to be determined 



BUSIN£:SS CONTRACTS AND LEGAL OBLIGATIONS. 109 

by a construction of the instrument by which it is given. 
Where a general power to borrow money is expressly 
given, such power includes authority to give the lender 
the ordinary securities for the sum borrowed, such as 
bonds, notes, or collaterals. The power of an agent to 
borrow money on his principal's account may be implied, 
when the carrying on of the business intrusted to him 
absolutely requires the exercise of such power. An agent 
is presumed to have power to do whatever is necessary 
to effect the purposes of his agency. The necessity for 
borrowing money must, however, be shown, before the 
power to borrow can be inferred from the original employ- 
ment of the agent. To justify this inference, the borrow- 
ing must be practically indispensable, and it is not sufficient 
that it was convenient, or advantageous, or more effectual 
for the transaction of the business provided for. Nor is 
a party dealing with an agent entitled to assume the ex- 
istence of any extraordinary state of facts, in order to bring 
the act of the agent within the scope of his apparent author- 
ity. Where it is absolutely necessary, in order to carry 
on the business with which the agent is intrusted, that he 
should borrow money on the credit of his principal, the 
authority to borrow will be implied. But a power given 
to an agent to draw^ or indorse checks, for and in the name 
of his principal, gives him no authority to overdraw his 
principal's account at the bank. Where the act of an agent, 
in borrowing money for his principal, w^as without original 
authority, the principal's ratification of the act cannot be 
inferred from the mere fact that the money borrowed went 
into the business of the principal or was beneficial or 
advantageous to him. But where an agent without original 
authority borrow^ money on behalf of his principal, and 
uses it in a manner advantageous to the principal, the 
ratification of the agent's act may be inferred from the 
silence of the principal after knowledge of all the facts, or 
from his promise to repay the money so borrowed. 



110 BUSINESS LAWS FOR BUSINESS MEN. 

Section 123.— AGENT SELLING GOODS OUT OF 
MANUFACTURE.— An agent authorized to sell new- 
pattern goods, to be manufactured, in addition to those 
that the principal has already manufactured, or is willing 
to manufacture, has no authority to sell old-pattern goods, 
which have ceased to be manufactured, and could not be 
manufactured except at a loss. The very sending of an 
agent out to sell carries with it the idea that he is expected 
by the manufacturer to sell to his advantage ; and this 
being so, it cannot be said that because he is expressly 
authorized to sell manufactured goods, he is also author- 
ized to sell those that have ceased to be manufactured, and 
could not be except at a loss. An agent who has authority 
to sell new-pattern goods, to be manufactured, cannot be 
said to have authority to sell what is not being manufac- 
tured and will not be by his principal, because to manu- 
facture it would result in a loss, which is not the prevalent 
idea in any business. A reasonable man would not believe 
that a manufacturer would carry out any such contract, 
or that he intended to authorize his agent to make it. 

Section 124.— SELLING GOODS FOR ONE YEAR 
MADE IN ANOTHER.— The mere fact that one acts as 
agent of a manufacturer in one year, in the sale of goods 
manufactured for sale for that year, does not make him an 
ostensible agent for the sale of the goods for the next year, 
unless such goods are continued to be manufactured or are 
in stock, and the principal wishes to sell them. 

Section 125.— LIMITATION OF AUTHORITY.— A 

letter from a manufacturing firm to a customer, to the effect 
that for the next 3^ear they had certain new patterns of 
goods, which they would be ready to submit to the inspec- 
tion of the customer at the end of the month, and that "our 
Mr. W. will call on you early in January, and talk to you 
about handling the line for next year," only authorized the 
agent to sell the new patterns of goods which were in l1ie 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. Ill 

process of manufacture, or were offered to be manufac- 
tured, and the customer could not recover damages for the 
failure of the manufacturer to deliver old patterns of goods 
w^hich the latter had ceased to manufacture. 

Section 126.— SALE OF PROPERTY WHEN MANU- 
FACTURED. — An agent authorized to sell the property 
of his principal when manufactured, has no authority to 
sell before it is manufactured. 

CDmmission Merchants 

Section 127.— SELLING PROPERTY ON COMMIS- 
SION. — There is a common kind of agency exercised by 
commission merchants, who receive the property of others 
to sell on commission. But commission merchants, who 
usually have possession of the property itself, and receive, 
not a salary, but a part of the selling price as their com- 
pensation, and usually receive few if any instructions from 
the consignor of property to be sold on commission, are to 
be considered from a peculiar point of view in many of 
their business relations. 

Section 128.— INSURANCE OF CONSIGNED PROP- 
ERTY. — A commission merchant, unless he has received 
contrary instructions, has authority to insure property con- 
signed to him uninsured. 

Civil Code, Section 2368. 

Section 129.— AUTHORITY TO SELL ON CREDIT. 

— Unless specially restricted to sales for cash, a commis- 
sion merchant has authority to sell on credit any property 
intrusted to him fdr sale ; but such authority does not ex- 
tend to such things as it is customary to sell for cash. 
Therefore, even if he has not received any instructions to 
the contrary, a commission merchant will not have author- 
ity to sell on credit any commodity consigned to him for 



112 BUSINESS LAWS FOR BUSINESS MEN. 

sale which it is the custom at the place where he does 
business to sell for cash. 

Civil Code, Section 2368. 

Section 130.— PLEDGE OF CONSIGNED PROP- 
ERTY. — A commission merchant has no power to pledge 
or mortgage property consigned to him, and cannot trade 
the consigned property for other property. 
Civil Code, Section 2368. 

Section 131.— AUTHORITY OF PARTNER OR 
SERVANT. — The partner or servant of a commission mer- 
chant may have the same authority to deal with the con- 
signed property as he has, but he cannot delegate his 
authority to any person in an independent employment. 
Civil Code, Section 2368. 

Section 132.— INSTRUCTIONS FROM CONSIGNOR. 

— If a consignment of property is received by a commis- 
sion merchant, and the consignor at the same time sends 
certain instructions for him to follow, regarding any mat- 
ter connected with the sale, it is the duty of the merchant 
to follow such instructions if possible, notwithstanding 
any advances he may have made to his principal upon the 
property consigned to him. But if he has an opportunity 
to sell at the market price, and the consignor forbids him 
to do so, he need not follow such instructions, unless his 
advances are repaid him ; and if his advances are not repaid 
him, he may proceed to sell for his own reimbursement, 
after giving to the consignor reasonable notice of his inten- 
tion to do so, and of the time and place of sale. 
Civil Code, Section 2027. 

Section 133.— CANNOT EXTEND CREDIT.— When 

property is sold by a commission merchant on credit, the 
sale must be made on such credit as is usual, but he has 
no power to extend the credit agreed upon. 
Civil Code, Section 2028. 



busine:ss contracts and legal obligations. 118 

Section 134.— GUARANTY OF CERTAIN PRICE.— 

Where the commission merchant guarantees that the goods 
shall yield to the consignor a fixed price, he cannot by sell- 
ing for less, or by deducting his commission, avoid his 
liability to make his returns to the consignor amount to 
the price agreed upon. The value of the goods, as it turns 
out to be, is not material. He has fixed his own liability, 
and his guaranty of a certain price, and his liability to the 
consignor for so much, becomes absolute whenever he 
makes a sale, whether for cash or upon credit. 

Section 135.— INSTRUCTIONS TO "SELL ON AR- 
RIVAL." — Where a consignment of property is made to 
a commission merchant, with instructions to "sell on ar- 
rival," the merchant is bound to follow the instructions 
and sell for the price the property will command, and if he 
does not do so, but holds the property and neglects to sell 
on arrival, he will be liable for any losses sustained by the 
consignor occasioned by a fall in price. He cannot excuse 
himself by saying that the market was dull, for he had 
received his instructions, and it was his duty to sell, if the 
property might have been disposed of even at a reduced 
price. It was his duty to sell on arrival, no matter at what 
loss. 

Section 136.— SPECIAL PROPERTY IN CONSIGN- 
MENTS. — A commission merchant to whom goods have 
been consigned for sale, has a special property in the goods, 
by virtue of his position with relation to them. For many, 
if not for most purposes, he is treated as the owner of the 
goods. He has possession ; he may sell and make ship- 
ments ; he may collect the purchase price ; and, in fact, he 
may deal with the property as though it were his own, in 
the absence of explicit instructions limiting his authority. 
And it follows, necessarily, that any limitation upon his 
general authority must be brought to the notice of those 
8 



114 BUS1N£;SS LAWS FOR BUSINESS ME;N. 

with whom he deals, or his principal will be bound, even 
though he should go outside his instructions. 

Section 137.— IN WHOSE NAME INSURANCE MAY 
BE PUT. — Insurance on property, consigned to a commis- 
sion merchant for sale, may be for the benefit and in the 
names of both merchant and consignor. The merchant is 
not bound to insure, unless he has received orders to do 
so ; but he may insure, in his own name, or in the name and 
for the benefit of his principal. 

Section 138.— RESPONSIBILITY OF PURCHASER. 

— It is the duty of a commission merchant who sells on 
credit to make strict inquiry as to the responsibility of the 
purchaser; and if he neglects to do so, and a loss occurs, 
he will be liable for it to his principal. 

Section 139.— RIGHT TO COMMISSIONS.— If a com- 
mission merchant properly performs his duties, he will 
always be entitled to his commission in such sum as has 
been agreed upon between himself and principal; and if 
there has been no agreement as to the amount of the com- 
mission, then for a reasonable amount, which may depend 
upon usage or custom. But if the merchant be guilty of 
gross misconduct, or if he perform his duties in such a 
negligent manner as to prevent any benefit to the principal, 
he will not be entitled to receive his commission. If ex- 
penses are occasioned by his own negligence, he cannot 
recover them ; and he will not be entitled to the difference, 
when through his own negligence the proceeds of the sale 
are not equal to the expenses. 

Section 140.— MAY SELL IN HIS OWN NAME.— 

Having a special property in goods consigned to his care, 
a commission merchant may sell in his own name ; and 
when the purchaser pays him, the former is discharged 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 115 

from all liability to the real owner of the goods. When- 
ever the commission merchant sells in his own name, he 
may sue the purchaser in his own name for the price. 

Section 141.— TAKING PROMISSORY NOTE IN 
PAYMENT. — V'/hen it is proper for a commission mer- 
chant to sell on credit, and he takes the promissory note 
of the purchaser in payment, payable to himself, he takes 
it in trust for his principal, and subject to his order. 

Section 142.— LIEN OF COMMISSION MERCHANT. 

— Having possession of the goods, and a special property 
in them, the commission merchant has a lien upon them 
and their proceeds, and the securities received upon their 
sale, for his expenses and commissions, for his advances to 
his principal, and usually for the balance of his general 
account with his principal. 

Section 143.— AUTHORITY AS GENERAL AGENT. 

— Where general authority is given to a commission mer- 
chant to buy and sell for the principal, he is considered as 
a general agent, and his acts will be binding on his prin- 
cipal, even where he has violated his private instructions. 

Section 144.— CARE TO BE TAKEN OF GOODS 
CONSIGNED. — A commission merchant is bound to keep 
the goods intrusted to him with the same care as a pru- 
dent nian would bestow upon them, if they were his own. 
He must use ordinary diligence in the care and preserva- 
tion of the property while it is in his hands ; and for any 
loss occasioned by his neglect of his duty in this respect he 
will be personally liable to his principal. 

Section .145.— MUST NOT MIX GOODS WITH AN- 
OTHER'S. — A commission merchant has no right to mix 
the goods received from one person with the goods of 
another. 



116 BUSINESS LAWS FOR BUSINESS MEN. 

Section 146.— DUTY TO RENDER ACCOUNTS.— A 

commission merchant is bound to give the unbiased use of 
his own discretion and judgment to his principal, and he 
must keep and render to his principal true accounts of his 
transactions, and he must keep the principal informed of 
all facts material to his interests ; and if losses occur 
through neglect of these duties, he will become personally 
responsible to the principal. 

Real Estate Agents 

Section 147.— EMPLOYMENT MUST BE IN WRIT- 
ING. — The employment of a real estate agent, giving him 
authority to sell land for another, is required by the law 
of this State to be in writing. The contract or some mem- 
orandum of it must be in writing. The contract or memo- 
randum need not state that the agent is to receive a com- 
mission for his service, but it must show in writing that the 
agent was employed. 

Civil Code, Section 1624. 

Section 148.— VERBAL CONTRACT INVALID.— 

A verbal contract for the sale of real property, made by 
an agent who has no written authority from another, is 
invalid. And if the agent without authority in writing 
allows an intending purchaser to take possession of the 
property, such possession will only be held at the will of 
the owner, who can bring an action for unlawful detainer 
against the party in possession. 

Section i49.~EXCEPTION WHERE SALE MADE 
IN PRESENCE OF PARTIES.— There is a seeming ex- 
ception to the strict rule above stated, in cases where the 
owner and the buyer are both present, and hear the terms 
proposed and accepted, and make no objection on either 
side to the authority of the agent. If a real estate agent, 
who has not received any written authority to make the 
sale, meets with the purchaser and the owner, and states 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 117 

the terms of sale in the presence and hearing of both, and 
the purchaser makes a payment on account, for which the 
agent gives him a receipt, and the money is passed over 
to the owner; here, it is true that the agent has not been 
authorized by any writing subscribed by the owner to 
make the sale, but the owner has stood by without objec- 
tion, and has seen and approved all that was said and done. 
The law of California will not permit either party, under 
such circumstances, to take advantage of the agent's lack 
of written authority, but will hold the sale as having been 
in legal effect made by the principals themselves. This 
it does, because the courts would have to sanction a clear 
and palpable fraud if the vendor of land could be allowed 
to repudiate the acts of his supposed agent under such 
circumstances. One who with knowledge accepts the 
proceeds of an unauthorized sale of his property cannot 
dispute the validity of the sale. 

Section 150.— DESCRIPTION OF LAND.— A contract 
to employ a real estate agent need not describe the lands 
specifically, if the terms of the employment can be made 
definite without it. But where it was evidently intended 
to limit the employment to certain property, it must appear 
that the property sold is within the description. Thus, if 
a contract should describe the property generally, as ''all 
my land in Mendocino County, California," it would be a 
valid contract of employment, as capable of being made 
certain, and applying generally to all the lands of the prin- 
cipal. But if enough appeared on the face of the contract 
to show that it was the intention that the agent should sell 
a particular tract or lot of land, the agent, in order to make 
a valid sale, would have to confine himself strictly to the 
land particularly described. 

Section isi.^RIGHT OF AGENT TO COMMIS- 
SIONS WHEN PROPERTY WITHDRAWN FROM 
SALE. — Where the contract of employment provides that 



118 busine:ss laws for business men. 

if the owner shall before the expiration of the contract 
withdraw the property from sale the agent will be entitled 
to his commissions, the agent is entitled to recover his 
commissions as a debt due from the owner, upon his with- 
drawing the property from sale within the time named in 
the contract. The owner who withdraws the property from 
sale will be liable for the commissions, even though the 
agent has not found a purchaser for the property. For by 
his contract he gives the agent the opportunity to earn the 
commissions within a certain time ; and if, during the term, 
he withdraws the property from sale, he thus deprives the 
agent of the benefit of the unexpired time, and may pre- 
vent his opportunity for making a sale. 

Section 152.— WHEN CONTRACT FULFILLED 
AND COMMISSION EARNED.— A real estate agent is 
never entitled to commissions for unsuccessful efforts. 
When he undertakes to find a purchaser, the risk of fail- 
ure is wholly his. The reward comes only with his suc- 
cess. That is the plain contract and contemplation of the 
parties. The agent may devote his time and labor and 
expend his money with ever so much devotion to the in- 
terest of his employer, and yet if he fails, if, without effect- 
nig an agreement or accomplishing a bargain, he abandons 
the effort, or if his authority is fairly and in good faith ter- 
minated, he gains no right to commissions. He loses the 
eft'ort which was staked upon success, and in such event 
it matters not that after his failure and the termination of 
his agency, what he has done proves of use and benefit to 
the principal. But, on the other hand, if an agent author- 
ized to negotiate a sale produces, within the time limited 
by his contract, a purchaser, ready, willing, and able to 
purchase upon the terms stated in the contract, his service 
is completed and he is entitled to his commissions. He is 
entitled to his commissions, notwithstanding the owner 
backs out, and refuses to sell to the purchaser produced. 



HUSfNiCSS CONTRACTS AND LE:GAL OBLIGATIONS. 119 

Section 153.— WHAT IS SUFFICIENT AUTHORITY 
FROM CORPORATION.— Where an individual gives 
anthorit}^ to a real estate agent to sell his land, any writing, 
in any form, whether memorandum, agreement, or letter, 
or telegram, which expresses on its face the employment 
of the agent to sell, is a sufficient authorization. But in 
the case of a corporation the law is entirely different. 
A corporation can only act by and through its officers, 
and a writing, though signed by its President, Cashier, 
or Secretary, or all three together, stating that a real estate 
agent had been employed to sell lands owned by the cor- 
poration, would not give any authority to the agent what- 
ever. Corporations act by their officers, and the officers 
must transact their business in the manner provided by 
law, and in no other way. Therefore, a corporation which 
has land to sell, and wishes to employ an agent to make 
the sale, can only act upon the matter through its Board 
of Directors, when duly assembled, by a resolution duly 
passed and recorded. There must be a quorum of the 
Directors present, and a majority of the Board must vote 
in favor of the resolution to employ the agent, and the 
*'aye" and "no" vote must be entered in the minutes. The 
agent should then be furnished with a copy of the resolu- 
tion, which will be a sufficient indication of his authority. 
When the By-Laws of the corporation provide that notice 
to Directors of meetings of the Board be given in a cer- 
tain manner, notice must be given strictly in accordance 
with the By-Laws, or the resolution passed will not be 
valid. It will make no difference that all the Directors, 
without the formality of a meeting, sign their names to a 
written authorization to the agent. Such a writing would 
be worthless. Under it the agent would have no legal 
authority to deal with the land. Under it, he could neither 
make a valid contract of sale, nor collect any commissions 
from the corporation for his services. The Directors, the 
President, the Secretary, the Cashier, the stockholders, no 



120 busine:ss laws for business men. 

one of these has power, by virtue of his office or invest- 
ment, to employ an agent to buy or sell for the corporation, 
nor have all together the power which neither has sepa- 
rately. The powers of a corporation must be exercised, 
and its property controlled, by its Board of Directors ; the 
decision of the majority of the Directors, made when duly 
assembled, being valid as a corporate act. The Board 
must be duly assembled, and their transactions should be 
recorded. The Directors when not acting as a Board have 
not the necessary power to employ an agent. The absence 
of a resolution of the Board renders any writing purporting 
to employ the agent, though signed by the Directors or 
other officers, illegal and invalid. 

Civil Code, Sections 305, 308, 377. 

Section 154.— RATIFICATION OF UNAUTHORIZED 
EMPLOYMENT BY CORPORATION.— Where an agent 
acts for a corporation, without having received proper 
authorization by resolution of the Board of Directors, the 
corporation may yet ratify the act of the agent in making 
a sale ; provided, the ratification must be in the same form 
and manner as the original authorization should have been, 
that is, it must be by a resolution of the Board lawfully 
adopted. 

Section 155.— OPTION TO AGENT TO SELL FOR 
COMMISSION ABOVE A FIXED PRICE.— The owner 
of land may lawfully make a contract authorizing real 
estate agents to sell the land for a special sum and agree- 
ing to pay them a commission of whatever sum they realize 
above that amount. Such a contract is binding upon both 
parties. It confers an option upon the agents, and a sale 
by the agents under such a contract is, as the law regards 
it, a sale made by them in the capacity of vendors upon 
their own account, and not strictly for the account of the 
owner of the land. If the agents find a purchaser, under 
such a contract with the owner, and receive a deposit 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 121 

to bind the bargain, but the sale does not go through 
because a title insurance company will not insure the title 
to the land, the owner has no claim on the deposit, and the 
agents have a right to refund the money to the intending 
purchaser. Such option to real estate agents, with rela- 
tion, also, to a deposit received upon a purchase which 
afterwards failed to go through, was the subject of a 
Supreme Court decision in this State, in a San Francisco 
case. C. H. Robinson and C. B. Hobson executed to the 
real estate firm of Easton, Eldridge & Co. the following 
instrument : ''We hereby authorize Easton & Eldridge, for 
us and within five days from date hereof, and until this 
authority is canceled in writing by us, to sell for the sum 
of $10,000 — net dollars — the following described property 
situated in the City and County of San Francisco, State of 
California, to-w^it : All of block 935, outside lands ; and we 
will pay the said Easton & Eldridge a commission of all 
over said sum of $10,000, net, for which they may sell said 
property with our consent. Witness our hand and seal 
this twenty-fourth day of August, A. D. 1887, C. B. 
Hobson, C. H. Robinson." The real estate firm found 
a purchaser, receiving from him $1,050 as a deposit on 
the purchase price of $10,500, with 30 days allowed for 
search of title, and upon the condition that the Title In- 
surance Company would insure the title. The Title Insur- 
ance Company refused to insure the title, and Easton & 
Eldridge repaid the deposit to the purchaser. Then Hobson 
and Robinson commenced a suit against the agents for the 
deposit, claiming that the money was received for their 
account, and that the agents had no right to pay it back 
to the purchaser. The Supreme Court decided the case in 
favor of Easton, E.ldridge & Co., the decision of the court 
stating, that the relation of the defendants to the plaintiffs 
was not that of a mere agent.; that while their authority to 
sell the land was derived from the plaintiffs, yet the sale 
was to be made for their own account and benefit, as well 



122 BUSINESS LAWS ]?0R BUSIN:eSS M^N. 

as for that of their principals. By the terms of the author- 
ization from their principals, Easton, Eldridge & Co. ac- 
quired such a right to a portion of the proceeds of sale as 
to enable them lawfully to make a contract of sale upon 
terms of their own choosing. The principals, in effect, 
said the Supreme Court, gave to Easton, Eldridge & Co. 
an option for five days to endeavor to sell the block of land 
for whatever sum they could obtain, and upon whatever 
terms they might make, provided they should receive there- 
for the sum of $10,000, and agreed that the agents should 
have whatever sum they could realize above that amount. 
The relation thus created between them was rather that 
of a vendor and purchaser under a contract of sale than 
one of principal and agent, and a sale by the agents under 
such a contract was in the capacity of a vendor upon their 
own account, and not solely for the account of their prin- 
cipal. The agents were entitled to all the proceeds of the 
sale in excess of $10,000, and therefore they had the right 
to make the sale upon such terms as in their judgment 
would enable them to realize the highest price for the land. 
Upon a sale by them, the owners were entitled to the 
immediate payment of the $10,000, but the agents could 
sell the land either for cash or upon time, as they might 
choose, so long as the owners received their money, and the 
terms of sale made by the agents did not require any ratifi- 
cation by the owners. And upon the disapproval of the 
title by the Title Insurance Company, the Supreme Court 
decided, the purchaser had the right to demand, and these 
agents had the right to refund, the money that had been 
received by them as a deposit upon the sale. (Decided by 
the Supreme Court of California, in the case of Robinson 
vs. Easton, Eldridge & Co., reported in Volume 93 of 
California Reports, page 80.) 

Section 156.— FAILURE OF SALE BY DEFECTIVE 
TITLE. — Where an agent is employed to sell land, the title 
to prove good or no sale, and he finds a purchaser, ready, 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 128 

able, and willing to buy upon the agreed terms, and the 
title proves to be defective, the agent is nevertheless en- 
titled to his commissions. The failure of the sale by reason 
of the defective title is not the fault of the agent, but is the 
fault of the owner, and he must pay the agent's commis- 
sions. 

Section 157.— FAILURE OF OWNER TO REMOVE 
DEFECTS. — Where real estate agents enter into a con- 
tract with an intending purchaser, acknowledging the 
receipt of a deposit, and stipulating that the title is to prove 
good or no sale, in which case the deposit is to be returned, 
and such contract is ratified by the owner of the land, even 
though not in the first place authorized, the owner is bound 
by it; and if it appears that there is a defect in the title, it 
is the duty of the owner to remove the defect and perfect 
the title within the time limited by the contract, and if he 
does not do so, the purchaser will be discharged from his 
obligation, and will be entitled to the return of his money 
paid on deposit. 

Section 158.— RATIFYING AUTHORITY OF BROK- 
ERS. — The owner may ratify by his subsequent conduct 
the unauthorized act of the brokers in stipulating that the 
title shall be good or no sale. The action of the owner of 
the land in agreeing to the contract of his brokers witli 
the intending purchaser, and in accepting him as the pur- 
chaser of the property upon the terms of such contract, 
is a waiver of objection that the brokers exceeded their 
authority in providing in the contract that the title should 
prove good, or that there would be no sale. And in this 
case it is not necessary that such ratification shall be in 
writing as between the owner of the land and the brokers, 
as it relates to no interest in the land, in so far as it affects 
the brokers, but only to the owner's obligation to pay them 
their commission when earned. 



124 BUSINESS LAWS FOR BUSINESS MEN. 

Section 159.— WHAT IS GOOD TITLE.— A title to 
land, to be good, should be free from litigation, palpable 
defects, and grave doubts ; and it should consist of both 
legal and equitable titles, and should be fairly ascertain- 
able from the records. A perfect title is one that must be 
good and valid beyond all reasonable doubt. Whether the 
title in any particular case is good or not is a question 
which it is often difficult to determine, and one upon which 
lawyers and judges often disagree. 

Section 160.— SALE BY OWNER.— A party who em- 
ploys a real estate broker to sell his land may, notwith- 
standing, negotiate a sale himself; and if he does so with- 
out any agency of the broker, and before the latter has 
procured a purchaser, he is not liable to the agent for 
commissions. But, as already stated, the commission of a 
real estate agent is earned by finding a purchaser ready, 
willing, . and able to enter into a valid contract for the 
purchase upon the terms fixed by the owner; and having 
introduced such a one to the owner, the agent cannot 
be deprived of his right to commissions by the owner 
negotiating a sale himself. 

Section 161.— COMMISSIONS UPON SALE OR EX- 
CHANGE BY OWNER.— Where by the terms of a con- 
tract for the sale of real estate through brokers, they are 
authorized to sell the property for the owners at any time 
within a year, and it is agreed that the commission shall 
be paid if the owners should withdraw the property from 
sale or effect a sale in any way during the year, the brokers 
are entitled to commissions upon sale or exchange of the 
land by the owners themselves, and need not show that 
they had procured or could have procured a purchaser 
within the time fixed in the contract. The sale or exchange 
of the land by the owner himself puts it beyond the power 
of the agent to thereafter make a sale, and this entitles 
the agent to the same commissions he would have earned 



busine:ss contracts and legal obligations. 125 

if he had sold the land for the amount realized by the 
owners. 

Section 162.— SALE BY OWNER THROUGH AN- 
OTHER AGENT.— Where by the terms of an agreement 
conferring a sole agency for the sale of land, the principal 
agrees to pay to the agent the same commission as if he 
had procured a purchaser, if he should sell or agree to sell 
the land or part of it to any one in the twelve months next 
ensuing, an immediate obligation to pay the commission 
is created against the principal by virtue of the contract, 
when the principal himself effects a sale through another 
agent within that period. The agent first appointed has 
an immediate right of action to recover his commissions. 
And the owner cannot deduct from the commissions agreed 
to be paid to his exclusive agent the amount of commissions 
paid by him to another agent for eft'ecting a sale. 

Section 163.— MISREPRESENTATION BY OWNER. 

— Where by means of a fraudulent misrepresentation of 
the principal that he had not sold the land,' and had changed 
his intention as to selling it, the agent having an exclusive 
right of sale was induced to accept part payment of his 
commission in satisfaction of the obligation of the principal, 
he is entitled to rescind the agreement for satisfaction, 
and recover the full amount of commission which had pre- 
viously- matured in his behalf, by reason of a sale effected 
by the principal of which he was ignorant. 

Section 164.— WHAT CONSTITUTES A SALE BY 
OWNER. — It is not necessary, in order to constitute a sale 
by the owner sufficient to entitle the agent to his com- 
missions, that the owner should sell for cash, or upon the 
same terms the agent was authorized to effect, or that he 
should make a conveyance, or that a legal title should 
pass to his purchaser. In a case decided by the Supreme 



126 BUSINESS LAWS FOR BUSINESS MEN. 

Court of California, Shainwald, Buckbee & Co. sued M. K 
Cady for commissions on the sale of the townsite of Agua 
Caliente. In the written agreement given by Cady to the 
agents, authorizing them to find a purchaser, it was stipu- 
lated that if Cady himself made a sale of the property 
within the term of the agreement, the agents were to be 
allowed two per cent commissions upon the amount of 
such sale ; Cady sold the land, partly on credit, and the pur- 
chaser afterwards failed to make stipulated payments, and 
surrendered the contract and delivered up possession of 
the land; and at the time when Shainwald, Buckbee & Co. 
sued Cady for their commissions, he had again possession 
of the land. The Supreme Court decided that Shainwald, 
Buckbee & Co. were entitled to their commissions, because 
Cady had absolutely placed it out of their power to make 
a sale of the property at all. Cady had received a portion 
of the purchase price, and given up possession of the prop- 
erty; and although the purchaser failed to keep possession, 
and surrendered the contract, and turned the possession 
back to Cady, the Supreme Court said that a sale was con- 
summated sufficient in law to make Cady liable to the 
agents under their agreement. (Decided by the Supreme 
Court of California in the case of Shainwald, Buckbee & 
Co. vs. M. K. Cady, reported in Volume 92, California Re- 
ports, page 83.) 

Section 165.— LIABILITY OF AGENT UNDER 
CONTRACT TO SELL FOR SPECIFIED AMOUNT. 

— Where an agent accepts real property for sale, and binds 
himself in writing to sell the property within a certain time 
for a certain amount, and to accept all over that sum as his 
compensation, he makes himself absolutely liable to the 
owner. And if he fails to make a sale for the amount 
stated in his contract, within the term stipulated, the owner 
can sue him for damages. The owner will be entitled to 
recover from the agent as damages the difference between 
the actual market value of the land, at the end of the term 



BUSINESS CONTRACTS aND LEGAL OBLIGATIONS. 127 

within which it was to be sold, and the amount the agent 
bound himself to realize from it for the owner. 

Section i66.— LIABILITY OF OWNER TO AUC- 
TIONEER. — One representing himself as the owner of 
real estate, who employs an auctioneer to sell the same 
under an agreement that, in the event of a sale, the auc- 
tioneer shall receive for his services a percentage on the 
amount bid, cannot, after a sale by the auctioneer, avoid 
paying him for his services because the purchaser refuses 
to take the property, owing to a real or alleged defect in 
the title. The auctioneer in such case is entitled to com- 
pensation for his services, unless there is a special agree- 
ment that it shall depend on the consummation of the sale. 

Section 167.— WHAT AGENT MUST PROVE IN 
SUIT TO RECOVER COMMISSIONS.— Where an agent 
is compelled to sue for his commissions, for effecting a sale 
of real estate, to entitle him to judgment in his favor he 
must show that he was employed by or on behalf of the 
owner to make the sale, and that his authority, or some 
note or memorandum thereof, was in writing, subscribed 
by the party to be charged, or by his authorized agent. 
And before an agent can be said to have earned his com- 
mission, it must also be shown that he produced a pur- 
chaser, who was ready and willing and able to make the 
purchase on terms satisfactory to his employer, and that he 
was the efficient agent or procuring cause of the sale. The 
duty assumed by the broker is to bring the minds of the 
buyer and seller to an agreement for a sale, and the price 
and terms on which it is to be made, and until this is done, 
his right to commissions does not accrue. It must further 
appear that the broker performed the duty assumed by 
him within the time limited in his contract, or within such 
extension of time as may have been granted by his em- 
ployer. If he failed to do that, he is not entitled to the 



128 BUSINi:SS LAWS FOR BUSINESS MliN. 

commission, even though he made efforts to sell the prop- 
erty, and first called it to the attention of the party who 
subsequently made the purchase, unless the delay was 
caused by the negligence, fault, or fraud of the owner. 
Civil Code, Section 1624. 

Section 168.— AGENT'S MISTAKE AS TO TITLE.— 

When the agent has received a deposit, and the purchaser 
afterwards claims that the title is not good and demands 
the deposit back, the agent, if he be a simple agent to sell, 
will take his own chances if he returns the deposit to the 
purchaser. For if the owner insists upon the purchaser 
taking the lands, and litigation follows, and it is decided 
that the title to the land was in reality good, the agent will 
be compelled to pay the amount of the deposit to the owner, 
less his commissions, even though he has already returned 
the deposit to the purchaser; and he will not be protected 
by the fact that he obtained the opinion of an attorney, 
and acted upon it in good faith, that the title was not good, 
before returning the deposit. His liability for the deposit 
to his principal will depend upon the fact, whether the title 
was or was not good, and not upon what he or anybody 
else may have thought about it, and the only way to deter- 
mine the matter definitely is by a judgment of a court. 

Section 169.— REPUDIATION OF CONTRACT BY 
VENDOR. — Real estate agents may recover from their 
principal the commission agreed upon for a sale secured 
by them, if the proposed contract of sale was not beyond 
their authority, though the vendor refuses absolutely to 
consummate the purchase or to negotiate with reference 
to it. It is immaterial whether the power conferred upon 
real estate agents is to sell or merely to secure a purchaser, 
so far as their right to recover the agreed commission is 
concerned, if they comply with their part of the contract in 
procuring a purchaser, to whom the vendor refuses to 
convey. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 129 

Section 170.— TERMS OF PAYMENT, AND RE- 
FUSAL TO ACCEPT TENDER.— A contract between a 
vendor and a real estate agent, providing that the terms 
of payment are to be as buyer and seller may agree, does 
not impose upon the agent the duty of selling for cash, 
even if it be construed as reserving to the vendor the right 
to agree upon the terms in person ; and there can be no 
reasonable objection to the terms of payment as a defense 
to the recovery of commissions, if when cash was tendered 
by the purchaser, no objection was made on account of the 
terms. When the vendor has refused to accept the tender 
of the purchase money, and repudiated the contract made 
by his real estate agent with the purchaser, he cannot 
defend against the payment of commissions on the ground 
that the purchase money was not paid. 

Section 171.— HUSBAND GIVING AGENT PROP- 
ERTY OF WIFE TO SELL.— Where a vendor gives to 
real estate agents the property of his wife to sell as his 
property, and so describes it in the contract, and they pro- 
cure a purchaser without knowledge that the title was not 
in the vendor, his want of title cannot affect their right to 
recover their commissions from him. 

Section 172.— WHAT CONSTITUTES FINDING A 
PURCHASER. — To find a purchaser means more than 
to procure some one who will offer to negotiate for the 
purchase. It implies the production of one who is not 
only ready and willing to comply with the terms of the 
purchase, but who has also the present ability to consum- 
mate it, and to comply with all of its terms, and who is 
also •willing and ready to do all the acts that may be re- 
quired to make an actual purchase of the land. To pro- 
duce one who makes an offer to purchase, and who is 
without means, or who is not in condition to comply with 
the terms of the sale, and against whom a claim for dam- 
ages resulting from a failure to perform the contract of 



130 busine:ss laws for business men. 

purchase could not be enforced, does not constitute the 
finding of a purchaser within the meaning of the law; and 
the mere statement by one who is produced that he is 
ready and willing to make the purchase, is not sufficient, 
for he must satisfy the owner that he has the ability to 
do so. Upon the production of such purchaser, if the trans- 
action is not to be consummated by an immediate delivery 
of the deed and payment of the purchase price, the owner 
has the right to demand that a valid, enforceable contract 
for the purchase of the land shall be executed by him. 
The owner may, however, waive the execution of such 
contract ; as, if after the broker has introduced the purchaser 
to him, he himself assumes to prepare a contract, or to 
deal with the purchaser upon other terms, or accepts a 
verbal obligation from him. 

Section 173.— OWNER AND PURCHASER NEED 
NOT BE BROUGHT FACE TO FACE.— It is not essen- 
tial, to entitle the agent to his commissions, that he should 
bring the owner and the purchaser face to face. If the 
agent secures from the purchaser a valid contract, accord- 
ing to the terms of his agreement with his principal, and 
a deposit of money if required, and the purchaser is really 
ready, willing, and able to complete the purchase accord- 
ing to the terms proposed, the agent has performed his 
duty as fully as though the parties had been brought 
together in person. 

Section 174.— AMOUNT OF COMMISSIONS.— The 

amount of compensation or commissions which a real 
estate agent shall receive will in all cases depend upon his 
contract with the owner, if the contract makes any pro- 
vision in respect to it; and, in the absence of any agree- 
ment on the amount of commission, it will be measured 
by the value of the service rendered, and the agent will 
be entitled to a reasonable compensation, to be ascertained 
from all the circumstances. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 131 

Section 175.— PREVENTION OF SALE BY OWNER. 

— If the owner in fact has a good title, but goes to the 
purchaser, or to the purchaser's attorney, and makes rep- 
resentations for the purpose of defeating the sale, and 
makes the intended purchaser believe that the title is bad, 
and the latter refuses to proceed with the transaction in 
consequence, the broker is entitled to his commission. 

Section 176.— WHEN PURCHASER AND OWNER 
ARE NOT BROUGHT TOGETHER, PURCHASER 
MUST SIGN A WRITTEN CONTRACT.— If the agent 
does not produce the purchaser before the owner in per- 
son, ready and willing to enter into a contract, the pur- 
chaser must sign a written contract, and this written con- 
tract must be delivered by the agent to the owner. This 
important rule as to the duty of the agent was stated by 
the Supreme Court of California in a case where B. M. 
Gunn, a real estate broker, sued the Bank of California for 
commissions. The Superior Court of San Francisco de- 
cided that Gunn was entitled to commissions, but the 
vSupreme Court set the judgment aside, and decided that 
upon the facts the broker was not entitled to commissions. 
Gunn had a contract with the bank, by which he was to sell 
certain property within a certain time for $41,000, and was 
to receive $1,000 as his commission for making the sale; 
he found one Keating, within the time, who was ready, 
able, and willing to purchase at the price of $41,000, but 
his agreement with Keating was oral only, and Keating 
signed nothing, although he orally agreed to buy for the 
price stated and paid $500 on account, and took a receipt 
signed by Gunn alone ; the receipt recited that Keating 
was to have twenty days within which to examine the 
title to the property. On the same day Gunn sent to a 
Mr. Brown, who was acting for the bank in the matter, the 
following letter : ''Dear Sir : I beg leave to inform you that 
I have this day sold the lot and improvements known as 



132 BUSINESS LAWS FOR BUSINESS MEN. 

the Golden Gate Flour Mill Property for the sum of forty- 
one thousand dollars, less one thousand dollars commission, 
and have given purchaser twenty days to examine title to 
same. Please send me abstract and approval of sale, and 
oblige." This letter was returned by Brown with this 
endorsement : ''I herewith approve above sale. The Bank 
of California. Thomas Brown." Keating refused to com- 
plete the sale, on account of a defect in the title. Keating 
Avas financially able to pay the price he orally agreed to 
pay for the land, but he signed no contract which bound 
him to complete the purchase in case the title to the land 
was perfect, and Gunn did not introduce him to Brown, or 
inform Brown who was the purchaser referred to in his 
letter, and Brown did not learn the intended purchaser's 
name until about the time the title was rejected by Keat- 
ing's attorney. In the suit brought by Gunn for the $i,ooo 
commission, the Supreme Court held that, as Keating had 
not signed any contract, and had not been produced before 
Brown as the purchaser, Gunn had not ''found a purchaser," 
as the law reads, and was not entitled to the commissions. 
And the Supreme Court, in its decision of the case, said : 
"The question here is, What is 'finding' or 'producing' a 
purchaser within the meaning of the law? Is it sufficient 
for a broker to merely find a person financially able, and 
who verbally agrees with him to purchase upon the terms 
of the vendor, and makes a deposit, but who neither signs 
a binding agreement to purchase upon the terms of the 
vendor, nor is produced before the vendor as a person 
ready and willing to enter into such a contract? It seems 
to us very clear that this question must be answered in 
the negative. The contract of the broker is to negotiate 
a sale, that is, to procure a valid contract to purchase, 
which can be enforced by the vendor if his title is perfect; 
or if he does not procure such contract, to bring the vendor 
and the proposed purchaser together, that the vendor may 
secure such a contract, unless he is willing to trust to an 
oral agreement. This contract on the part of the broker 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 133 

is complete, when he dehvers or tenders to the owner a 
vahd written contract, containing the terms of sale agreed 
on, signed by a party able to comply therewith, or able to 
answer in damages if he should fail to pei,-forni. This is 
all the agent can do, and when it is done he is entitled 
to his commissions. But the necessity of a written con- 
tract of sale may be rendered unnecessary if the agent bring 
the vendor and vendee together, and the latter is able and 
willing, and offers to complete the contract, provided the 
vendor will make the conveyance. In such a case the agent 
has done all that he can do, and if the vendor under such 
circumstances refuses to complete the sale, he nevertheless 
will be compelled to pay the agent his commissions. The 
object of the vendor is to effect a sale of his property, and 
when the real estate broker produces a contract executed 
by a solvent purchaser, he is then entitled to pay for his 
services, whether the trade is finally consummated or not, 
because if the vendee refuses to take the property, the 
vendor holds the contract, which renders the vendee liable 
for all damages (including commissions paid by the vendor 
to the broker) for a failure to comply. The right of Gunn 
to the agreed compensation depends upon the performance 
of his contract to procure a purchaser, and as he did not 
do this, and defendant neither waived nor prevented such 
performance, he has not earned his commission." (De- 
cided by the Supreme Court of California in the case of 
Gunn vs. Bank of California, reported in Volume 99, Cali- 
fornia Reports, page 349.) 

Section 177.— WHEN OWNER MUST RETURN 
MONEY PAID ON CONTRACT.— A vendor under con- 
tract for the sale of .land, who has received a part of the 
purchase price at the time of the execution of the contract, 
cannot rescind the contract on account of the non-payment 
of the balance of the purchase price on the day stipulated 
for in the agreement, without returning or offering to 
return to the vendee the money that he has received on 



134 BUSINESS LAWS FOR BUSINE:SS MKN. 

account of the contract. When a contract of sale and pur- 
chase of lands is abandoned or rescinded by the parties, the 
vendee, though in default, may recover back installments 
of the purchase-money paid, less the actual damage to the 
vendor occasioned by his breach of the contract. 

Section 178.— AGREEMENT BETWEEN AGENTS 
TO COOPERATE IN SELLING.— Real estate agents 
may cooperate in the selling of land, for a share of the 
commissions, and such agreement between themselves need 
not be in writing. The agreement will be sufficient, if 
made orally, and the courts will enforce it. 

Section 179.— AUTHORITY TO SELL ON CREDIT. 

— When a real estate agent receives authority from the 
owner to sell land on credit, the time of credit specified 
in their agreement is the measure of the agent's authority. 
Where the agreement authorizes the agent to sell on 
credit, but does not specify the time of credit, the agent 
must use his discretion in the matter, and has authority to 
give the purchaser a reasonable credit ; and the credit given, 
to be reasonable, must be such as is usual and customary 
on sales of real estate in the particular vicinity. There is 
no set rule as to what will be considered a reasonable credit, 
but the question must be determined from all the circum- 
stances in each particular case. 

Section 180.— POWER OF ATTORNEY TO AGENT 
TO MAKE DEED.— The question as to what is necessary 
in a power of attorney for the sale of land, to authorize the 
agent to execute and deliver a deed to the purchaser, 
must be determined in each case upon its own peculiar 
circumstances. As between the parties to the transaction, 
it is proper to consider their situation at the time of the 
execution of the power of attorney, and their intention is 
to be gathered from the words of the instrument, and all 
the circumstances under which it was written. A power of 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 135 

attorney for the sale of land is sufficient as between the 
parties to the transaction, whether properly acknowledged 
or recorded, or not, if it is otherwise valid. 

Section i8i.— RISK OF PURCHASER WHO TAKES 
LAWYER'S ADVICE AS TO TITLE.— A purchaser of 
land is not justified in refusing to accept a conveyance, and 
in demanding back a deposit paid by him on account of 
purchase-money, merely because of the opinion of his law- 
yer, though given in good faith, that the title is not safe, 
if the opinion is erroneous, and the record title is in fact 
perfect. The purchaser must take the risk of the sound- 
ness of the advice upon which he ?.cts. 

Section 182.— LIABILITY OF AUCTIONEER FOR 
DEPOSIT AT AUCTION SALE.— Although by the terms 
of an auction sale a deposit of a percentage of the cash 
payment with the auctioneer pending the examination of 
the title, which is warranted perfect, makes the auctioneer 
a stakeholder for the parties ; yet when the title is shown 
to be perfect, the deposit then becomes, according to the 
terms of the sale, a portion of the cash payment,- and the 
property of the owner of the land, less the charges and 
commissions of the auctioneer; and the auctioneer cannot 
thereafter return it to the purchaser except at his own risk. 

Section 183.— AGENT'S KNOWLEDGE OF TITLE.— 

A real estate agent has nothing to do with the title or 
ownership of the property, and his knowledge as to the 
title, or the equitable estate of a third person therein, is 
of no consequence ; and his right to the compensation 
contracted for does not in any way depend on the validity 
or invalidity of the "owner's title to the property. 

Section 184.— INTEREST ALLOWED BY LAW ON 
AGENT'S COMMISSIONS.— A demand for broker's 
commissions, which is capable of being made certain by 



136 BUSINESS LAWS EOIi BUSINESS MEN. 

computation, draws interest from the time when it became 
due. 

Civil Code, Section 3287. 

Section 185.— HOW AUTHORITY OF AGENT CAN 
BE EXTENDED. — When the term of a real estate agent's 
employment is about to expire, the authority of the agent 
cannot be extended by a verbal agreement. The extension 
of the term of his employment, like the original agree- 
ment, must be in writing. 

Section 186.— COSTS IN SUIT FOR COMMISSIONS. 

— Where a real estate agent sues in the Superior Court 
for commissions, he will have to pay the costs of the court 
— Clerk's fees, Sheriff's fees, Reporter's fees, jury fees — if 
the verdict in his favor be for less than $300. In other 
words, the agent must secure a judgment for at least $300, 
or he will not be entitled to costs. If the agent sues in the 
Justice Court, for less than $300, the judgment in his favor 
will carry the costs. 

Code of Civil Procedure, Section 1022. 

Section 187.— COMMISSIONS OUT OF PURCHASE- 
MONEY. — Where the agreement between the owner and 
the agent is, that the agent is to receive his commissions 
''out of the purchase-money," or "out of the first money 
received" on the sale, the agent will not be entitled to any 
commissions at all, if the sale does not go through. Under 
such a contract, the sale must be completed, and the money 
paid by the vendee, before the agent is entitled to com- 
missions. 

Section 188.— SELLING LAND ON SHARES.— Under 
an agreement between a land owner and a broker, whereby 
the latter is to sell the land for a share of the proceeds above 
the cost price and selling expenses after all the land is sold. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. lo7 

the procuring of a purchaser for all the tract, who is ac- 
cepted by the owner and with whom an executory contract 
is made, is a sufficient performance of the agreement to 
entitle the broker to his share of the profits. 

Section 189.— PURCHASE BY AGENT FROM HIM- 
SELF. — An agent or sub-agent employed to assist in the 
consummation of a sale of land is incapable of legally pur- 
chasing the property from himself without the knowledge 
of the principal, and such a purchase will always be set 
aside, at the option of the principal. The reason is, that 
the agent should not unite his personal and his representa- 
tive characters in the same transaction ; he cannot serve two 
masters ; and the law will not permit him to be exposed to 
the temptation, or brought into a situation where his own 
personal interests conflict w^ith the interests of his prin- 
cipal, and with the duties which he owes to his principal. 

Section 190.— PURCHASE BY AGENT FROM PRIN- 
CIPAL. — \Miile an agent cannot purchase from himself, 
he may, where all the circumstances show fair dealing and 
good faith, purchase land from his principal, although it 
was placed in his hands to sell to others. There is no law 
against a purchase by an agent from his principal, where 
the facts are fully disclosed to the principal, and the agent 
acts in good faith, taking no advantage of his situation. 
The principal may, if he sees fit, deal with the agent as 
with any other person. The agent has the same right to 
deal directly with his principal as has a stranger. And 
when the agent deals wdth his principal at arm's length, 
and after a full disclosure of all that he knows with respect 
to the property, the sale will be as valid as though the 
purchase had been made by a stranger. 

Section 191.— AGENT BUYING IN HIS OWN NAME. 

— When the agent is employed by his principal to buy real 
estate, and uses the principal's money in making a purchase 



138 BUSINESS LAWS FOR BUSINESS MEN. 

of land, but has the deed made in his own name, the law 
will not permit him to gain any advantage by the trans- 
action. He will be held as a trustee for the principal, and 
will be compelled to convey the land to the principal. 

Section 192.— WHEN AUTHORITY OF AGENT 
REVOCABLE. — Where a real estate agent has authority 
to sell land, if no time is stated within which the sale can 
be made, the authority is revocable at the will of the owner, 
at any time before it has been exercised. 

Section 193.— WHICH ONE OF TWO BROKERS IS 
ENTITLED TO COMMISSIONS.— When two brokers 
have been employed by an owner, and one of them in fact 
names the property to the purchaser, and the purchaser 
negotiates solely with him and at his instance with the 
owner, the other broker is not entitled to commissions, 
notwithstanding he casually learns that such purchaser is 
considering the expediency of making the purchase, and 
therefore calls upon him and urges the purchase, and reports 
his name to the owner. Only the broker whose efforts 
were the procuring cause of the sale is entitled to the com- 
missions from the principal. 

Section 194.— AUTHORITY OF AGENT MAKING 
LEASE FOR TERM LONGER THAN ONE YEAR.— 

Where a real estate agent is authorized to lease land of 
his principal, he cannot make a lease for a term longer than 
one year, unless his authority to make the lease is in writ- 
ing. The authority of an agent to make a lease for a period 
in excess of one year must be in writing, and cannot be 
conferred by oral contract. A lease by an agent exceed- 
ing the term of one year cannot operate as a valid lease 
for one year, the agent's authority not being in writing. 
Where the owner of land, without knowledge of a lease 
made by an agent without authority, has rented the land 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 139 

to another, no power remains in him to ratify the pre- 
vious unauthorized act of his agent. 
Civil Code, Section 1624. 

Section 195.— DEATH OF PRINCIPAL REVOKES 
AUTHORITY OF AGENT.— The death of the principal 
revokes the authority of the agent, except where the agent's 
authority is coupled with an interest in the land. In order 
that the agent's authority shall survive the death of his 
principal, it is necessary that such an interest or estate 
shall have passed to the agent as will entitle him to execute 
the authority to sell in his own name. Sometimes, the 
agent Avill hold a power of attorney, from which it can be 
seen that he has an interest in the land, and that it was 
the intention of his principal that the power should be 
irrevocable by death. But, whatever form the agent's 
written authority may be in, his right to commissions, or 
the principal's promise to pay commissions on the sale, 
will not of themselves be sufficient to create an agency 
which will survive the principal's death. The agent must 
have acquired by his power from the principal an interest 
in the land itself. What constitutes an interest in the land, 
sufficient for keeping alive an agent's authority after the 
principal's death, depends very much upon the circum- 
stances of each particular case — so much so that illustra- 
tions of the rule here would not be of value. 

Fire Insurance Contracts 

Section 196.— CONTRACT BETWEEN THE PAR- 
TIES. — Insurance against loss by fire constitutes one of 
the common and important contracts in the business of 
every community. In California the fire insurance business 
is carried on by corporations, nearly all having ample cap- 
ital, and fully able to meet such losses as they are required 
to pay. Yet so many and so varied are the policies issued, 
and the circumstances and causes of fires and losses, and 



140 BUSINESS LAWS FOR BUSINi:SS MEN. 

the claims and adjustments of claims after fires have oc- 
curred, that it is not a matter for wonder that conflicts are 
continually arising between the insurer and the insured, 
over the terms and conditions of the contract and the 
rights and obligations of the parties. The Legislature has 
attempted in our statute law to fix the mutual obliga- 
tions and liabilities of the parties to the contract of fire 
insurance, and the Supreme Court of California has in 
many decisions stated definite rules of construction which 
must be applied to the policies issued by insurance com- 
panies. The contract of insurance is generaly defined by 
the statute of California, as being a contract whereby one 
undertakes to indemnify another against loss, damage, or 
liability arising from an unknown or contingent event. 
Insurance against fire is a contract whereby the insurer 
becomes bound, for a definite premium or consideration, 
to indemnify the insured against loss or damage to the 
property named in the policy. The policy, and the con- 
ditions contained in it, fix the relations between the parties 
to the contract, and furnish the measure of their respective 
rights and liabilities. 

Civil Code, Section 2527. 

Section igy.^DESIGNATION OF PARTIES.— The 

party who issues the policy of fire insurance is called the 
insurer, and the party who is indemnified is called the 
insured. 

Civil Code, Section 2538. 

Section 198.— INSURABLE INTEREST.— Every inter- 
est in property, or relating to it, or liability in respect to 
it, of such a nature that a contemplated peril might directly 
injure the insured, is an insurable interest, in the law of 
California. The contract of insurance, being one of in- 
demnity, the insured must have such an interest in the 
property as that its destruction will result in pecuniary 
loss to liim. But it is not necessary he shall have a title, 



BUSINESS CONTRACTS AND LE:GAL OBLIGATIONS. 141 

provided his interest, whatever it may be, is such that it 
would be impaired or injured by the destruction of the 
properly. Nor is it necessary that the interest of the in- 
sured l)e personal; for if he has an interest in the property 
as trustee, agent, mortgagee, commission merchant, com- 
mon carrier, warehouseman, administrator, pledgee, lessor 
or lessee, consignee, or judgment creditor, the courts have 
held that this is an insurable interest. And it has been 
held that even one who has no title, legal or equitable, in 
the property, and no present possession or right of posses- 
sion, has an insurable interest if he will derive benefit from 
the continued existence of the property, or will suffer loss 
by its destruction. 

Civil Code, Section 2546. 

Section 199.— MEASURE OF INTEREST IN PROP- 
ERTY. — The measure of an insurable interest in property 
is the extent to which the insured might be damaged by 
loss of or injury to the property. Therefore, under the 
provisions of our law, if the owner of a building insures it 
for more than it is worth, he will not be entitled to the 
full amount, merely because the company has issued a 
policy and accepted a premium on a fictitious value ; but 
the amount the insurer will be liable to pay, in all cases, 
will be the amount, to the extent of the policy, necessary 
to reimburse the insured for the pecuniary loss he has sus- 
tained, unless the insurer has agreed in the policy that 
in case of loss the property shall be valued at a given sum. 
Where the interest of the insured is less than a whole 
ownership, as where he has an interest only as mortgagee, 
his insurable interest in the property is measured by the 
amount of the debt, and no more ; and in fact, the insured 
can never be entitled to recover more than his actual loss. 
Civil Code, Section 2550. 

Section 200.— WHEN INSURABLE INTEREST 
MUST EXIST.— The law of California provides, that the 



142 BUSINESS LAWS :POR BUSINESS M^N. 

interest insured must exist when the insurance takes effect, 
and when the loss occurs, but need not exist between those 
two dates. The meaning of this is, that where the poHcy 
does not prohibit it, the insured may dispose of his interest 
in the insured property, after the poHcy has been issued, 
and if, before the term of the poHcy ends, he becomes again 
the owner of his interest in the property, and owns it at 
the time of the loss, he may recover on the policy. The 
interest of the party in the insurance is simply suspended, 
when he has disposed of the property without changing the 
policy to another, until the interest in the property and the 
interest in the insurance are again vested in himself. A 
change of interest in a thing insured, after the loss, does 
not affect the right of the insured to collect the insurance. 
Where a person holds a policy which includes several 
articles separately insured, and transfers some of the 
articles only, his insurance upon the articles not trans- 
ferred is still good. A policy is not rendered invalid by 
the death of the insured; for his administrator will hold 
the policy for the benefit of those who succeed to his estate. 
The transfer of interest by one of several partners, joint 
owners, or owners in common, who are jointly insured, to 
the others, does not avoid an insurance, even though it 
has been agreed that the insurance shall cease upon an 
alienation of the thing insured. 

Civil Code, Sections 2552, 2553, 2554, 2555, 2556, 
2557. 

Section 201.— INSURANCE WITHOUT INTEREST 

ILLEGAL. — The sole object of insurance is the indemnity 
of the insured, and if he has no insurable interest when 
the policy takes effect, the policy is void ; and if he has no 
insurable interest when the loss occurs, he cannot collect 
the insurance. 

Civil Code, Section 2551. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 143 

Section 202.— WAGER POLICIES VOID.— Every pol- 
icy executed by way of gaming or wagering is void. 
Civil Code, Section 2558. 

Section 203.— DUTY OF PARTIES IN MAKING THE 

CONTRACT. — Each party to a contract of fire insurance, 
if they expect the policy to be free from attack, must deal 
fairly with one another, and must not be guilty of misrep- 
resentation or concealment of material facts, upon enter- 
ing into the contract. Insurance companies act usually, if 
not always, by agents sent out to solicit insurance, or by 
local agents residing in the locality where the property 
to be insured is situated. The company is bound by all 
the acts of such agents done within the scope of their 
authority. The insured may act for himself, or through 
a broker or other agent. But however the parties come 
together, the law requires the utmost good faith on the 
part of both. The law of California, recognizing this prin- 
ciple, provides that each party to a contract of insurance 
must communicate to the other in good faith all facts 
within his knowledge which are or which he believes to 
be material to the contract, and which the other has not 
the means of ascertaining; therefore, it is the duty of the 
company's agent to disclose fully to the insured all the 
conditions and requirements of the policy which his com- 
pany^ proposes to issue, and it is the duty of the insured 
to communicate to the agent all facts within his knowledge 
respecting the situation or condition of the property ; 
but neither party to a contract of insurance is bound to 
volunteer information of matters which the other knows, 
or which in the exercise of ordinary care the other ought 
to know, where there is no reason to suppose him ignorant 
of them ; and neither party is bound to give information 
to the other of facts of which the other waives communi- 
cation ; and neither party is bound to give the other infor- 
mation of matters open to the inspection equally of both ; 
except, that either party must answer the inquiries of the 



144 BUSINESS LAWS FOR BUSINl^SS MEN. 

other, as to any fact affecting the insurance, though it 
would not have been necessary to say anything about it 
if no inquiry had been made. Where inquiries are made 
by either party of the other, he is bound to answer truth- 
fully and in good faith. Both parties will be responsible 
for any false representations made during the negotiations, 
and for any false representation on a material matter the 
policy will be rescinded. The law deems a representation 
false when the facts fail to correspond with its assertions 
or stipulations. 

Civil Code, Sections 2563, 2564, 2566, 2579. 

Section 204.— THE POLICY OF INSURANCE.— The 

written instrument in which a contract of insurance is set 
forth is called the policy of insurance. The policy is re- 
quired by the law of California to specify, the parties be- 
tween whom the contract is made, the rate of premium, 
the property insured, the interest of the insured in the 
property, if he is not the absolute owner, the risks insured 
against, and the period during which the insurance is to 
continue. When an insurance is made by an agent or 
trustee, the fact that his principal or beneficiary is the per- 
son really insured may be indicated by describing him as 
agent or trustee, or by other general words in the policy. 
To render an insurance effected by one partner or part 
owner applicable to the interest of his copartners or of 
other part owners, it is necessary that the terms of the 
policy should be made to apply to the joint or common 
interest. When the description of the insured in a policy 
is so general that it may comprehend any person or any 
class of persons, he only can claim the benefit of the policy 
who can show that it w^as intended to include him. A 
policy may be so framed that it will inure to the benefit 
of whomsoever, during the continuance of the risk, may 
become the owner of the interest insured. The mere trans- 
fer of a thing insured does not transfer the policy, but 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 145 

suspends it until the same person becomes the owner of 
both the poHcy and the thing insured. 

Civil Code, Sections 2587, 2589, 2590, 2591, 2592, 
2593- 

Section 205.— OPEN AND VALUED POLICIES.— A 

policy is either open or valued. An open policy is one in 
which the value of the thing insured is not agreed upon, 
but is left to be ascertained in case of loss. A valued policy 
is one which expresses on its face an agreement that the 
thing insured shall be valued at a specified sum. 
Civil Code, Sections 2594, 2595, 2596. 

Section 206.— RUNNING POLICY.— A running policy 
is one wdiich contemplates successive insurances, and which 
provides that the object of the policy may be from time 
to time defined, especially as to the subjects of insurance, 
by additional statements or indorsements. The general rule 
is that the property insured must be specified in the policy. 
But open or running policies are an exception to this rule. 
They were brought into use to enable merchants to insure 
their goods shipped at distant ports, when it is impossible 
for them to know the precise quantity or character of the 
goods, or the particular vessel in which they are shipped, 
and thus unable to describe accurately or particularly the 
subject of insurance. These policies generally, if not uni- 
versally, require that the risk shall be declared or reported 
to the company as soon as known to the assured. 
Civil Code, Section 2597. 

Section 207.— ACKNOWLEDGMENT IN POLICY 
OF RECEIPT OF PREMIUM.— An acknowledgment in 
a policy of the receipt of premium is conclusive evidence 
of its payment, so far as to make the policy binding, not- 
withstanding any stipulation therein that it shall not be 
binding until the premium is actually paid. 
Civil Code, Section 2598. 



146 BUSINESS LAWS FOR BUSINESS MEN, 

Section 208.— AGREEMENT NOT TO TRANSFER.— 

An agreement, made before a loss, not to transfer the claim 
of a person insured against by the insurer, after the loss 
has happened, is void. 

Section 209.— CERTAIN WARRANTIES.— A warranty 
is either expressed in the policy, or implied from circum- 
stances. A statement in a policy, of a matter relating to 
the person or thing insured, or to the risk, as a fact, is an 
express warranty of the fact. A statement in a policy, 
which imports that it is intended to do or not to do a thing 
which materially afifects the risk, is a warranty that such 
act or omission shall take place ; as that a watchman will 
be kept on the premises, or that a supply of water wall be 
kept on the building ready for use. 

Civil Code, Sections 2607, 2608. 

Section 210.— WHAT ACTS AVOID POLICY.— The 

violation of a material warranty, or other material provision 
of a policy, on the part of either party thereto, entitles the 
other to rescind. A policy may declare that a violation of 
special provisions shall avoid it, otherwise the breach of 
an immaterial provision does not avoid the policy. 
Civil Code, Sections 2610, 261 1. 

Section 211.— EXONERATION OF INSURER.— An 

insurer is not liable for a loss caused by the wilful act of 
the insured; but the insurer is not exonerated by the mere 
negligence of the insured, or of his agents, or others. 
Civil Code, Section 2629. 

Section 212.— NOTICE OF LOSS.— In case of loss *by 
fire, the insured must give notice to the company of the 
loss, without unnecessary delay. If the policy fix the time 
within which notice of loss must be given to the company, 
the insured must give notice within that time ; if the policy 
does not fix the time, the insured must give notice of the 



Bi;SINi:SS CONTRACTS AND LKGAL OBLIGATIONS. 147 

loss within a reasonable time. The notice may be given 
to an agent of the company, or it may be sent to the office 
of the company, and it may be sent by the most available 
means, by mail, or in person. If the policy provides that 
the notice must be in writing, it must be so given, but 
verbal notice will be sufficient without such provision. 
Civil Code, Section 2633. 

Section 213.— PRELIMINARY PROOFS OF LOSS.— 

When preliminary proofs of loss are required by a policy, 
the insured is not bound to give such proof as would be 
necessary in a court of justice; but it is sufficient for him 
to give the best evidence which he has in his power at the 
time. All defects in a notice of loss, or in preliminary proof 
of loss, which the insured might remedy, and which the 
insurer omits to specify to him without unnecessary delay 
as grounds of objection, are waived. Delay in the pre- 
sentation to an insurer of notice or proof of loss is waived, 
if caused by an act of the insurer, or if he omits to make 
objection promptly and specifically upon that ground. If 
a policy requires, by way of preliminary proof of loss, the 
certificate or testimony of a Justice of the Peace, or other 
person, it is sufficient for the insured to use reasonable dili- 
gence to procure it, and in case of the refusal of such per- 
son to. give it, then to furnish reasonable evidence to the 
insurer that such refusal was not induced by any just 
ground of disbelief in the facts necessary to be certified to. 
Civil Code, Sections 2634, 2635, 2636, 2637. 

Section 214.— DOUBLE INSURANCE.— A double in- 
surance exists where the same interest in property is insured 
by several insurers separately. In cases of double insur- 
ance, the several companies must contribute ratably toward 
the loss, without regard to the dates of the several policies. 
Civil Code, Section 2642. 



148 BUSINESS LAWS FOR BUSINESS MEN. 

Section 215.— ALTERATION INCREASING RISK.— 

An alteration in the use or condition of a thing insured 
from that to which it is Hmited by the poHcy, made without 
the consent of the insurer, by means within the control of 
the insured, and increasing the risk, entitles an insurer to 
rescind a contract of fire insurance. 
Civil Code, Section 2753. 

Section 216.— ALTERATION WHICH DOES NOT 
INCREASE RISK.— An alteration in the use or condition 
of a thing insured from that to which it is limited by the 
policy, which does not increase the risk, does not affect 
a contract of fire insurance. 

Civil Code, Section 2754. 

Section 217.— VERBAL CONTRACT TO ISSUE 
POLICY. — A verbal contract to issue a policy, made by 
the owner of the property and the agent of the company, 
is a valid agreement. Therefore, if the owner of a building 
applies to an agent, or if the agent solicits the insurance, 
and a verbal agreement is made for a consideration that a 
policy will be issued for a certain amount covering the 
property, and the company then refuses to issue the policy, 
it will be liable for the loss, whether the policy is issued 
or not. If a fire occurs and destroys the property, the 
owner can sue the company for damages, for its failure to 
issue the policy, and recover his loss on the property, not 
exceeding the amount of insurance verbally agreed upon. 

Section 218.— CERTIFICATE OF NOTARY.— Under a 
provision of a fire insurance policy requiring that in case 
of loss by fire the assured must obtain the certificate of 
the Notary nearest the insured building, not concerned in 
the loss as a creditor or otherwise, nor related to the as- 
sured, as to the justice of the claim, where it appears that 
the nearest Notary refused to act, on the ground that he 
was employed by the insurance company in ascertaining 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 149 

the facts and taking affidavits concerning the fire, the as- 
sured is reHeved of the necessity of obtaining his certificate, 
and need not inform the company of the reason for obtain- 
ing the certificate of another Notary. (Decided by the 
Supreme Court in case of Noone vs. Transatlantic Fire 
Insurance Co., which decision is printed in Volume 88 of 
the California Reports, page 152.) 

Section 219.— FALSITY OF MATERIAL REPRESEN- 
TATIONS BY INSURED.— One who makes an applica- 
tion for fire insurance must not make false representations, 
as to any material fact upon which the insurance depends, 
for if he does the company may cancel the policy. This 
the company may do by making a tender of the premium 
back to the insured, and notifying him that the policy is 
canceled on account of the false representation. And if 
the company, where a false representation has been really 
made, tenders the premium back and gives the insured 
notice of the cancellation of the policy, before the com- 
mencement of a suit on the policy, this will operate as a 
rescission of the policy and will defeat the suit. As an 
illustration, it may be cited, that a condition in a policy of 
insurance upon a mill, that during such time as the mill is 
idle a watchman shall be employed by the insured *'to be 
in and about the premises day and night," is broken if 
during the time the mill is idle but one watchman is em- 
ployed,*who was not instructed to watch the mill at night, 
and w^ho slept every night in a building three or four hun- 
dred feet from the mill. A man employed to watch in the 
daytime, and who is permitted to sleep at night, is not a 
watchman at night. And to entitle the insured to recover 
upon such a policy,, it must be shown that he has in good 
faith employed a watchman to perform the duties required 
by the terms of the policy. (Decided by the Supreme Court 
in the case of Rankin vs. Amazon Insurance Co., which 
decision is printed in Volume 89 of the California Reports, 
page 203.) 



150 BUSINESS LAWS FOR BUSINESS MEN. 

Section 220.— STATEMENTS AS TO VALUATIONS. 

— A provision in the policy that the appHcation shall be 
considered a warranty, and if the property is overvalued 
in it, the policy shall be void, applies only where the state- 
ments as to value are intentionally false. 

Section 221.— RIGHTS OF MORTGAGEE— EFFECT 
OF SALE UNDER FORECLOSURE.— A mortgagee of 
insured property, to whom the loss is made payable, is 
entitled to recover the loss to the full extent of the mort- 
gage debt, although the fire occurs after a foreclosure sale 
and purchase by the mortgagee, but before the time for 
redemption has expired and before the execution of a sher- 
iff's deed to the mortgagee. (Decided by the Supreme 
Court in the case of National Bank vs. Union Insurance 
Co., which decision is reported in Volume 88 of the Cali- 
fornia Reports, page 497.) 

Section 222.— INSURANCE BY COMMISSION MER- 
CHANT—INCORRECT STATEMENT AS TO OWN- 
ERSHIP. — The Springfield Fire and Marine Insurance 
Co. insured against loss by fire a stock of goods, the prop- 
erty of a corporation in which F. H. McCormick and F. N. 
Delanoy were stockholders ; AlcCormick and Delanoy held 
the goods as security for advances made to the corporation, 
but in the application for the insurance they described the 
property as their own. The policy referred to the applica- 
tion, and made it a part of the policy, and provided that if 
the insured were not the sole, absolute, and unconditional 
owners of the property, and if their interest was not truly 
stated in the policy, then the policy should be void. 
McCormick and Delanoy sued the company for the insur- 
ance, but the Supreme Court decided that the policy was 
invalid, because the ownership was not truly stated in the 
application. (Decided by the Supreme Court in case of 
McCormick vs. The Springfield Fire and Insurance Co., 



BUSINESS CONTRACTS AND LE:GAL OBLIGATIONS. 151 

which decision is printed in Volume 66 of the CaHfornia 
Reports, page 361.) 

Section 223.— RIGHT OF ARBITRATION.— When a 

poHcy of fire insurance provides for arbitration upon the 
written request of either party, in case of difference touch- 
ing any loss or damage after the proof, the arbitration is 
not a condition precedent to the right of. action, unless 
demanded after proof of loss ; and if no demand for arbitra- 
tion is made within a reasonable time, or until after a right 
of action has become complete by the lapse of sixty days 
from the proofs of loss, the right to demand arbitration 
is waived. No right of arbitration exists under a fire in- 
surance policy when the stipulation for arbitration does 
not definitely fix the number of arbitrators nor provide a 
mode of selection. (Decided by the Supreme Court in case 
of Case vs. Manufacturers' Insurance Co., which decision 
is printed in Volume 82 of the California Reports, page 263.) 

Section 224.— WAIVER OF PROOF OF LOSS BY 
ARBITRATION. — A provision in a policy of fire insur- 
ance, requiring the assured in case of loss to forthwith 
give notice thereof to the insurer, and produce a certificate 
of preliminary proof from a notary or magistrate, is waived, 
if the insurer, after learning of the loss, makes no objec- 
tions to the absence of the notice and preliminary proof, 
but joins in proceedings for determining the loss by arbi- 
tratiofi, which proceedings are required by the policy to 
be taken after proof of the loss has been received in due 
form. In such a case, the company cannot deny the author- 
ity of its agents to waive the provision of the policy 
as to notice and preliminary proof, when it adopts their 
acts in that regard, and relies on the award as a defense 
to an action to recover for the loss. (Decided by the 
Supreme Court in the case of Carroll vs. Girard Fire Insur- 
ance Co., which decision is printed in Volume J2 of the 
California Reports, page 297.) 



152 BUSINESS LAWS FOR BUSINESS MKN. 

Section 225.— WAIVER OF CONDITION AS TO 
PREPAYMENT OF PREMIUM.— An express provision 
in a policy of insurance that the company shall not be 
liable on the policy until the premium is actually paid is 
waived by the unconditional delivery of the policy to the 
assured, as a completed and executed contract, under an 
agreement that a credit shall be given for the premium, 
and the company is liable for a loss which may occur 
during the period of credit. If an insurance policy con- 
tains a formal receipt of premium, its unconditional delivery 
is conclusive evidence of payment, so far as to estop the 
company issuing it from denying the validity of the policy, 
notwithstanding a declaration in the policy that it shall not 
be binding until the premium is actually paid. (Decided 
by the Supreme Court in the case of Farnum vs. Phoenix 
Insurance Co., which decision is printed in Volume 83 of 
the California Reports, page 246.) 

Section 226.— REMEDY FOR UNAUTHORIZED 
TERM OF CREDIT.— The giving of any credit by author- 
ity of the insurance company being a waiver of actual 
payment as a condition precedent to liability, the only rem- 
edy for an unauthorized term of credit is for the company 
to personally notify the assured, who is obliged to pay 
the premium, that he must pay at the end of the author- 
ized term of credit, or that the policy will be canceled 
for non-payment of premium. If the notice is sent by 
mail, and is not received, the cancellation for non- 
payment of premium is ineffective. 

Section 227.— INSURANCE OF UNOCCUPIED 
BUILDING. — Insurance companies may by their acts and 
conduct be estopped from availing themselves of a defense 
which they might otherwise interpose to an action upon 
their policies, or may waive their right to avail themselves 
of such defense. If a building is insured against loss by 
fire under a policy containing a proviso that it shall be or 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 158 

become void in case the building is or shall become vacant 
or unoccupied, when it was well known to the company's 
agents at the date of the policy and subsequently that it 
was and remained unoccupied, the company will be pre- 
sumed to have waived the clause as to occupancy. (De- 
cided by the Supreme Court in case of West Coast Lumber 
Co. vs. State Investment and Insurance Co., which decision 
is printed in Volume 98 of the California Reports, page 502.) 

Section 228.— PAYMENT OF POLICY.— When a policy 
of insurance provides that the loss shall be estimated when 
it occurs, and be paid in sixty days after due notice and 
proof of loss made by the assured, the company is not 
bound to pay until sixty days after such notice and proof. 

Section 229.— CONDITION AS TO CHANGE OC- 
CURRING IN BUILDING.— If a policy of insurance 
against fire contains a clause, that if the building shall fall 
except by fire, the insurance shall immediately cease, and 
the walls of the building are of brick, and a portion falls, 
leaving more than three-fourths standing, the building is 
not a fallen building within the condition of the policy, and 
if destroyed by fire in that condition the insurance company 
is liable for the loss. A clause in an insurance policy that 
it shall be void if any change occurs in the building by 
which the risk is increased without the consent of the com- 
pany, has reference only to a change produced by the act 
of the insured. It does not mean a change occasioned by 
accident, or by any cause over which the insured had no 
control. (Decided by the Supreme Court in the case of 
Breuner vs. Liverpool and London and Globe Insurance 
Co., which decision" is printed in Volume 51 of the California 
Reports, page lOi.) 

Section 230.— RULES FOR INTERPRETING CON- 
TRACT OF INSURANCE.— A contract of insurance must 



154 busine:ss laws for business men. 

be interpreted by the same rules as apply to any other con- 
tract. It must be so interpreted as to give effect to the 
mutual intention of the parties as it existed at the time of 
contracting, so far as that intention can be ascertained. If 
the contract for insurance is in writing, as where an appli- 
cation has been signed and a policy issued, the intention 
of the parties is to be ascertained from the application 
and the policy alone, if possible. The whole contract is 
to be taken together. When it is partly written and 
partly printed, the written parts control the printed parts, 
and, if there is any conflict between the two, the printed 
part must be disregarded. The contract may be explained 
by reference to the circumstances under which it was made, 
and in cases of uncertainty it is to be interpreted most 
strongly against the party who caused the uncertainty to 
exist. Where the policy provides for the forfeiture of the 
contract, upon failure to perform conditions named, the 
policy is to be interpreted most strongly in favor of the 
insured. The law does not favor forfeitures, and the in- 
surance company must make out a very strong case show- 
ing that a condition has not been complied with> before a 
court will declare the policy forfeited. The suit of Yoch 
vs. Home Mutual Insurance Company, decided by our Su- 
preme Court in 1896, illustrates the rules which are to be 
applied to the interpretation of contracts of insurance, 
where the effort is to ascertain the intention of the parties 
at the time of contracting. The policy contained a printed 
condition that, unless otherwise provided by agreement 
indorsed thereon, it should be void if (any usage of trade 
to the contrary) gasoline was kept on the premises. Testi- 
mony was given at the trial of the case tending to show that 
gasoline is one of the articles of merchandise usually kept 
in country stores, but that it is customary to keep it in a 
room or building by itself. It was also shown that, during 
the month prior to the fire, the insured would, in the day- 
time, bring small quantities of gasoline — one or two cans — 
from a building on another lot, which was used for storing 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 155 

it, into a room within the insured building and adjacent to 
the store, for the purpose of selHng it at retail to her cus- 
tomers. The Supreme Court decided the case against the 
insurance company, and said : "It must be held that it was 
the intention of the defendant to insure gasoline, if it was 
an article usually kept in the country stores, and that, if 
such was its intention, it was no violation of the policy for 
the insured to keep gasoline upon the premises as a part 
of the stock of merchandise. AMien the defendant agreed 
to insure a stock of merchandise 'such as is usually kept 
in country stores,' it must be presumed to have known the 
character of the merchandise vv^hich is usually kept in coun- 
try stores, and that gasoline is one of these articles, and, 
consequently, that the policy covered all such merchandise. 
AMien it Avas shown that gasoline is one of the articles 
which is usually kept in country stores, the court correctly 
held that it was a part of the subject of the insurance, and 
that the insured did not violate the policy by keeping it 
in stock. The defendant, when it issued the policy in ques- 
tion, knew the character of country stores, and that Mrs. 
Brooks kept for the purpose of retailing to her customers 
all of the articles kept by her, and that the gasoline which 
she kept was to be disposed of by retail in the same Avay 
as the other portion of her stock. To give to the policy 
the construction now claimed by the defendant would be 
to hold that, although it agreed with her to insure all the 
stock>she usually kept in her store, yet, if she continued to 
keep that stock, she forfeited all rights under the policy. 
The clause in the policy above quoted, and which is relied 
on by the appellant, cannot be construed as having this 
effect. The qualification therein which excepts the policy 
from becoming void, viz., 'unless otherwise provided by 
agreement indorsed thereon,' is found in the policy itself. 
The subject-matter of the risk — the stock of merchandise 
'such as is usually kept in country stores' — was written 
in the policy by the insurer; and, as the defendant must 
be deemed to have intended thereby to insure all such 



156 BUSINESS LAWS FOR BUSINESS MEN. 

articles as are usually kept in a country store, it must be 
held that this was an 'agreement indorsed' upon the policy, 
which removed the exemption from liability that would 
otherwise have existed. If there be any repugnance be- 
tween the written phrase, 'such as is usually kept in coun- 
try stores,' and the printed clause, 'any usage or custom 
of trade or manufacture to the contrary notwithstanding,' 
the former controls the latter, as being the more deliberate 
expression of the contracting parties." (Decided by the 
vSupreme Court in the case of Yoch vs. Home Mutual 
Insurance Co., which decision is printed in Volume 107 of 
the California Reports, page 327.) 

Section 231.— TIME WHEN POLICY TAKES EF- 
FECT. — The general rule is that a policy, if delivered, 
takes effect from its date, unless it be otherwise stated in 
the policy, or unless there is evidence of a contrary intent. 
If the premium be paid, and the policy be not delivered till 
afterward, the policy yet takes effect as of its date, even 
though a loss intervenes. The circumstances and the in- 
tent of the parties are to control. Where the exact time 
of the commencement and termination of the risk are speci- 
fied in the policy, or, if no policy has been written, in the 
contract, such specification governs in all cases ; where no 
time has been expressly indicated, the circumstances of the 
case will be considered for the purpose of determining it; 
if there are no circumstances indicating the intention of 
the parties, and no time is specified in the contract, the 
risk will be deemed to have commenced at the date of the 
contract. In the case last mentioned, if, before the contract 
of insurance is made, the property has ceased to exist, 
although unknown to the parties, the risk never attaches 

Section 232.— CONTRACT OF REINSURANCE— EF- 
FECT OF PRIOR LOSS.— Where an insurance company, 
which has insured the property of a lumber company against 



BUSINESS CONTRACTS AND Ll^GAL OBLIGATIONS. 157 

loss by fire, contracts for reinsurance by way of partial 
indemnity with another insurance company, in the absence 
of any circumstances indicating the mutual intention of 
the parties to give to the contract of reinsurance a retro- 
spective effect, the company agreeing to insure is not liable 
if the property insured had been destroyed by fire prior 
to the agreement, though at the time of the application and 
agreement neither of the insurance companies knew of the 
prior destruction of the property. (Decided by the Su- 
preme Court in the case of Union Insurance Company vs. 
American Fire Insurance Company, which decision is 
printed in Volume 107 of the California Reports, page 327.) 

Section 233. — WARRANTIES. — Warranties, in insur- 
ance, are distinguished into two kinds : Affirmative, or 
those which allege the existence at the time of the insur- 
ance of a particular fact, and avoid the contract if the 
allegation be untrue ; and promissory, or those which re- 
quire that something shall be done or omitted after the 
insurance takes effect and during its continuance, the 
doing or omission of which will avoid. the contract. An 
express warranty is a stipulation inserted in writing on the 
face of the policy, on the literal truth or fulfilment of which 
the validity of the entire contract depends. By a warranty 
the insured stipulates for the absolute truth of the state- 
ment made, and the strict compliance with some promised 
line of conduct, upon penalty of forfeiture for non-compli- 
ance with the warranty. A warranty must be strictly 
complied with. Whether the fact stated or the act stipu- 
lated for be material to the risk or not is of no conse- 
quence, the contract being that the matter is as represented, 
or shall be as promised ; and unless it prove so, whether 
from, fraud, mistake, negligence, or other cause, not pro- 
ceeding from the insurance company, and not caused by 
the intervention of the law or the act of God, the insured 



158 busine:ss laws for busine:ss men. 

can have no claim. One of the very objects of the war- 
ranty is to preclude all controversy about whether the 
statement was material or not. The only question in such 
cases is, Has the warranty been kept? If the warranty be 
a statement of facts, it must be literally true; if a stipu- 
lation that a certain act shall or shall not be done, it must 
be literally performed. Illustrating the law as above stated, 
it may be said, that if a house be insured against fire, and 
the language of the policy is, ''Warranted, during the policy^ 
to be covered with thatch," the insurance company will 
be discharged from liability if during the insurance the 
house should be covered with wood or metal, although the 
risk is diminished ; for a warranty excludes all argument 
in regard to its reasonableness, or the probable intent of 
the parties. Parties may contract as they please. When 
a warranty is adopted by them in their contract, the courts 
will not inquire as to its wisdom or folly, but must exact 
its observance as agreed to. The Supreme Court of Cali- 
fornia construed a ''watchman clause" in a policy issued 
by the Scottish Union and National Insurance Co., which 
read : "Warranted by the insured that during such times 
as the within buildings or works are idle or not in opera- 
tion, whether closed for repairs or during the absence of 
workmen, or otherwise (except as otherwise herein stated), 
one or more watchmen shall be on duty constantly, day 
and night, in and immediately about said buildings or 
works, or this policy shall be null and void." The insur- 
ance was on a sawmill, which was destroyed by fire. The 
watchman of the insured worked about the mill during 
the day, and slept at night in a house about 350 yards dis- 
tant, and visited the buildings several times during the 
night. The Supreme Court held that this was not a suffi- 
cient compliance with the warranty in the policy that a 
watchman should be kept on duty "constantly day and 
night in and immediately about" the insured buildings. 
There was also a controversy in the case as to whether 



busine:ss contracts and legal obligations. 159 

the mill was "shut down," within the meaning of the war- 
ranty in the policy, and the Supreme Court held that a 
sawmill which has stopped running for the winter is shut 
down, within the meaning of such term in a policy, though 
men are employed about the premises shipping lumber, 
and though the machinery has not been dismantled and 
put in shape for the winter. (Decided by the Supreme 
Court of California in the case of McKenzie vs. Scottish 
Union and National Insurance Co., which decision is printed 
in Volume 112 of the California Reports, page 548.) 

Section 234.— PROVISION AS TO BRINGING SUIT. 

— The policies of very many insurance companies have 
provisions similar to the following: ''No suit or action on 
this policy for the recovery of any claim shall be sustain- 
able in any court of law or equity until after full compli- 
ance by the insured with all the requirements of this policy, 
nor unless commenced within twelve months next after 
the fire." And, also, that ''proof of loss shall be made to 
the company within sixty days after the fire." Where a 
policy contains these provisions, a suit on the policy can- 
not be maintained if the proofs of loss were made after 
sixty days, and there is no evidence of a waiver by the 
company of the condition. 

Section 235.— PROOFS OF LOSS TO REINSURING 
COMPANY. — Where the risks of a fire insurance company 
are reinsured in another company, under a contract whereby 
the latter assumes the management and control of the 
business of the original insurer, and agrees to make adjust- 
ment and prompt payment of its losses, proofs of loss under 
a policy issued by the original insurer may be made to 
the reinsuring company. (Decided by the Supreme Court 
of California in the case of Whitney vs. American Insur- 
ance Co., which decision is printed in Volume 128 of the 
California Reports, page 121.) 



160 busine:ss laws for business men. 

Section 236.— LIABILITY OF HEIR FOR PREMIUM. 

— A policy procured by an heir, ''on the estate" of de- 
ceased, protects the interest of the heir in the property, 
though the administrator of the estate repudiates the con- 
tract and has nothing in fact to do with it. Having pro- 
cured the poHcy, the heir is Hable for the premiums, and 
will be compelled to pay them, no matter what action the 
administrator may take with regard to them. (Decided 
by the Supreme Court of California in the case of Phoenix 
Insurance Co. vs. Hancock, which decision is printed in 
Volume 123 of the California Reports, page 222.) 

Section 237.— INSURANCE ON HARVESTER 
WHILE IN USE. — A policy of insurance on a harvester 
''while in use" does not cover a loss occurring while it 
is stored in a shed, and is not being actually used for har- 
vesting purposes. (Decided by the Supreme Court of 
California in the case of Slinkard vs. Manchester Fire 
Assurance Co., which decision is printed in Volume 122 
of the California Reports, page 595.) 

Section 238.— LIABILITY OF COMPANY ON POL- 
ICY WRITTEN BUT NOT DELIVERED UNTIL 
AFTER FIRE. — A liability may attach to an insurance 
company, when the policy has been written but not deliv- 
ered until after the fire. If the policy is the memorial of 
a contract, which in its essentials had been agreed upon 
verbally before the fire, and which the parties intended 
should take effect according to its terms, the fact that the 
policy was not delivered to the insured until after the fire 
will make no difference in the company's liability; and if 
the terms of the contract to insure, as verbally entered 
into, and afterwards embraced in the imdelivered policy, 
are clearly shown, the company would be liable without 
any delivery of the policy at all. If, however, there has 
not been any verbal agreement, before the fire, that the 
company should insure the building and issue its policy 



BUSINESS CONTRACTS AND L^GAL OBLIGATIONS. 161 

accordingly, then delivery of the policy after the building 
has been destroyed, to the knowledge of the parties, will 
not give to the policy a binding effect. It is therefore 
in all such cases a very important question, whether the 
insurance company considered or admitted at any time 
that the contract was complete, and the risk had attached; 
and in this connection, the courts will always consider as 
strong evidence in favor of the insured the declarations 
and admissions of the agents of the insurance company, 
while engaged in the transaction with the insured, and up 
to the time the policy is delivered. Such statements and 
admissions of the agents, to bind the company, must be 
made at the very time of the negotiations and transactions 
for the insurance, and while acting in the business with 
the insured. (Decided by the Supreme Court of Califor- 
nia in the case of Crawford vs. Trans-Atlantic Fire Insur- 
ance Co., which decision is printed in Volume 25 of the 
California Reports, page 609.) 

Fire Insurance Agents 

Section 239.— APPOINTMENT .AND AUTHORITY 
OF AGENTS. — It is not necessary that the agent of a 
fire insurance company should have or produce a written 
appointment, for his agency may be shown in many other 
ways. The fact of his agency may be inferred from the 
relatio'hs he sustains to the company, from the course of 
prior dealings and transactions connected with it, and from 
the acts of the company with reference to the particular 
policy in question. The agent's authority may be actual 
or ostensible. He may possess and show an appointment 
in writing, or the company may accept the fruits of his 
labors, and knowingly permit him to hold himself out pub- 
licly as the company's agent. In either case the company 
will not be allowed to shield itself behind the defense that 
he was not really an agent. The powers of the agent are 
prima facie coextensive with the business intrusted to his 



162 BUSINE:SS laws for business MiiN. 

care, and will not be narrowed by limitations not communi- 
cated to the person with whom he deals. An insurance 
company, establishing a local agency, must be held respon- 
sible to the parties with whom it transacts business for 
the acts and declarations of the agent within the scope 
of his employment. 

Section 240.— BROKERS OR AGENTS.— The question 
arises as to the difference between a broker and an agent, 
in suits where a company makes the defense that the per- 
son claimed to have acted as its agent was not such in 
fact, but did act for the owner of the property. Where 
it is shown that the owner of the property solicits an in- 
surance agent to procure insurance for him, and himself 
pays the commission, such agent will be deemed not the 
agent of the company, but of the insured. He will be 
deemed a mere broker, making a bargain for the insured, 
and receiving a commission from him for so doing. But 
where the company employs a person to solicit insurance, 
and provides him with blanks and other papers, and pays 
him a commission on the business he brings in, he will be 
deemed the agent of the company, and not of the insured. 
In following sections will be found illustrations of some 
leading principles of agency in fire insurance, as decided 
by the Supreme Court of California. 

Section 241.— AGENT WAIVING FORFEITURE.— 

Simon Silverberg sued the Phenix Insurance Company 
upon a policy of fire insurance. When the case was tried, 
it appeared that soon after the occurrence of the fire, the 
company being notified of the fact, directed the proofs 
to be made out, which was done, and subsequently required 
Silverberg to present witnesses and vouchers. After these 
witnesses and vouchers had been examined at length, the 
company said the proofs were satisfactory, instructed Sil- 
verberg to make out formal proofs of loss, and said that 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 163 

the money would be paid at the expiration of the sixty 
days allowed by the policy for the payment of the loss. 
Upon the expiration of sixty days, a demand being made 
for the money, the company declared that the policy had 
been avoided by a breach of its conditions, and refused 
to pay. The question was whether the company's agents 
had waived the condition of the policy of which it was 
claimed there had been a breach. The facts were, that 
the agents of the company had full knowledge of all the 
facts upon which the forfeiture was based, and with this 
knowledge informed Silverberg that the insurance would 
be paid, and then refused to pay and claimed forfeiture. 
The Supreme Court held that the acts of the company's 
agents in examining witnesses and vouchers, and then 
expressing satisfaction and a willingness to pay, after full 
knowledge of all the facts, constituted a waiver of any 
forfeiture by Silverberg resulting from a breach of the 
conditions of the policy. The agents of the company were 
authorized, there being no provision in the policy to the 
contrary, to modify or altogether waive a condition of the 
policy. (Decided in the case of Silverberg vs. Phenix 
Insurance Company, which decision is printed in Volume 
6^ of the California Reports, page 36.) 

Section 242.— AUTHORITY OF LOCAL AGENT.— A 

local agent of a fire insurance company, who has authority 
to make a consummated and binding contract of insurance 
by countersigning and delivering its policy, and to extend 
a limited credit for the premium, has the power of the com- 
pany to waive a condition in the policy that it shall not 
be binding until the premium is actually paid, and does 
waive such condition by delivering the policy uncondition- 
ally under an agreement for credit, though the term of 
credit given be in excess of his actual authority. 



164 BUSINESS LAWS FOR BUSINESS MEN. 

Section 243.— OSTENSIBLE GENERAL POWER OF 
LOCAL AGENT. — A local agent of a fire insurance com- 
pany who is clothed with ostensible general authority to 
solicit applications, receive proposals, make contracts for 
insurance, receive first premiums, and to countersign and 
deliver policies within certain limits, is presumed to have 
the general power of the company w^ithin those limits to 
waive conditions precedent to the liability of the company 
upon policies which he is authorized to countersign and 
deliver. Such local agent is presumed to have power co- 
extensive with the business intrusted to his care, and his 
powers will not be narrowed by limitations not communi- 
cated to the person with whom he deals ; and he may bind 
his principal by any acts or contracts within the general 
scope of his apparent authority. 

Section 244.— KNOWLEDGE OF AGENT IS THE 
KNOWLEDGE OF COMPANY.— Whether an agent has 
general or only particular powers is not determined by 
simply calling him an agent. Where any fact which would 
constitute a breach of a condition precedent to any lia- 
bility of the company on the policy is fully known to an 
agent of the company, local or general, who is authorized 
to consummate the contract of insurance, the knowledge 
of such agent is the knowledge of the company ; and if 
the agent, with a knowledge of the breach of the condition, 
still recognizes the validity of the policy, this constitutes 
a waiver by the company of the forfeiture, and also a 
waiver of the general requirement that conditions can only 
be waived in writing indorsed on the policy itself. (De- 
cided by the Supreme Court of California in the case of 
Farnum vs. Phoenix Insurance Company, which decision 
is printed in Volume 83 of the California Reports, page 260.) 

Section 245.— ORAL WAIVER OF INDORSEMENT 
BY LOCAL AGENT.— A local agent who is clothed with 
general power to consummate contracts of insurance within 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 165 

a certain territory stands in the stead of the insurance com- 
pany, and represents its whole power to give vaHdity to 
the contracts which he is authorized to execute and deUver. 
and to waive conditions precedent to its HabiUty by oral 
agreement, so far as to estop the company from question- 
ing its original liability by reason of non-indorsement of 
the waiver upon the policy when delivered. 

Section 246.— APPLICATION MADE OUT BY 
AGENT OF COMPANY. — Insurance companies who 
do business through the medium of agents are responsible 
for their acts within the general scope of the business 
intrusted to their care, and no limitations of their author- 
ity will be binding on parties with whom they deal, Avhich 
are not brought to their notice. AMien the agent under- 
takes to prepare the application for the insured, he will be 
regarded in doing so as the agent of the insurance com- 
pany, and not of the insured; and any misstatements con- 
tained in the application, of which the insured is ignorant, 
will not be fatal to the policy. (Decided by the Supreme 
Court of California in the case of Wheaton vs. North British 
and Alercantile Insurance Company, which decision is 
printed in A'olume y6 of the California Reports, page 415.) 

Section 247.— FRAUD OF AGENT— DISOBEDIENCE 
OF INSTRUCTIONS.— A fire insurance company is bound 
by the acts, omissions, or frauds of its agent when acting 
within the scope of his employment, though he may have 
disobeyed the instructions received; and the company can- 
not be permitted to derive any advantage from the fraud 
of the agent in the manner of transacting its business, 
upon the claim that the agent's fraudulent conduct was 
not authorized. Therefore, fraudulent concealment of 
facts, or fraudulent representations of an agent to the 
insured, binds the company he represents, when the insured 
has no notice of any limitations upon the authority of the 
agent in the transaction. (Decided by the Supreme Court 



166 BUSINESS LAWS FOR BUSINESS MEN. 

of California in the case of Stockton Harvester Works vs. 
Glenn's Falls Insurance Co., which decision is printed in 
Volume 98 of the California Reports, page 557.) 

Section 248.— WAIVER OF PETROLEUM CLAUSE 
BY AGENT. — A condition in a policy for loss occurring 
while petroleum is kept or used on the insured premises is 
waived, if the general agent of the insurer, having knowl- 
edge at the time the insurance was effected that petroleum 
was kept and used, consented thereto, and represented to 
the insured that such use would not vitiate the policy. 
(Decided by the Supreme Court of California in the case 
of Herman Kruger vs. Western Fire and Marine Insurance 
Company, which decision is printed in Volume ^2 of the 
California Reports, page 91.) 

Section 249.— WAIVER CONTINUES DURING RE- 
NEWAL OF POLICY.— A waiver of conditions in the 
policy, made by the agent of the company at the time the 
insurance was originally effected, continues during the 
subsequent renewals of the policy. 

Section 25o.~AUTHORITY OF SPECIAL AGENT. 

— Power given to a special agent of a fire insurance com- 
pany to receive proposals for insurance, and to receive 
premiums, subject to the rules of the company and in- 
structions given by its general agent, includes power to 
make a verbal contract for insurance, sanctioned by instruc- 
tions from the general agent. 

Section 251.— ORAL PROMISE OF POLICY.— A dec- 
laration by the special agent to the insured, made at the 
time of his application for insurance, that it was unneces- 
sary for him to make a written application, as the general 
agent was asking for the insurance, and a promise by the 
special agent that a policy should be given to the insured 
which would cover the insurance applied for to the date 



bustne;ss contracts and le:gal obligations. 167 

of the oral application, taken in connection with letters 
from the general agent asking if the insurance would be 
required, is sufficient proof of the special agent's author- 
ity to bind the company for insurance from the date of 
the oral application. (Decided by the Supreme Court of 
California in the case of Harron vs. City of London Fire 
Insurance Co., which decision is printed in Volume 88 of 
the California Reports, page i6.) 

Section 252.— AGENT'S KNOWLEDGE OF FORMER 
INSURANCE. — Many policies contain the provision, that 
"if any other insurance has been or shall hereafter be 
made upon the said property and not consented to by this 
company in writing hereon, this policy shall be null and 
void." But notwithstanding this provision, where there 
is former insurance, which is not noted on the policy in 
question, if the agent of the company knows of the former 
insurance, and the policy is issued, such knowledge of the 
agent is knowledge of the company, and the policy is valid. 

Section 253.— OFFER TO RENEW POLICY.— Where 

the local agent of a fire insurance company has no actual 
or ostensible authority to contract for the renewal of a 
policy, a proposal made to such agent for a renewal is, 
until communicated to and accepted by the insurance com- 
pany, nothing more than a mere offer to renew the policy; 
and the fact that the agent promised to communicate the 
offer to the company, and did not do so until after the 
loss, does not create a binding contract of renewal. (De- 
cided by the Supreme Court of California in the case of 
Stewart vs. The Helvetia Swiss Fire Insurance Co., which 
decision is printed in Volume 102 of the California Reports, 
page 218.) 

Section 254.— UNAUTHORIZED CONTRACT OF 
LOCAL AGENT.— The local agent of the New Zealand 



168 busine:ss laws for business me:n. 

Insurance Co. at Fresno was not authorized to make con 
tracts, but sent all applications to the company at San 
Francisco for acceptance ; he received an application, how- 
ever, and told the insured that the insurance would begin 
at that time ; before the application was mailed from Fresno 
the building was burned ; the company was sued for the 
loss, but the Supreme Court said, that as the local agent 
had no actual or ostensible authority to make a contract 
of insurance, and the building being a saloon, which class 
of risks the company did not take, the company was not 
liable for the loss ; and it made no difference that at the 
time when the application was made the special agent of 
the company, who had no authority to enter into contracts, 
was present and approved of it. (Decided by the Supreme 
Court of California in the case of O'Brien vs. New Zealand 
Insurance Company, which decision is printed in Volume 
io8 of the California Reports, page 227.) 

Section 255.— WAIVER FROM KNOWLEDGE OF 
AGENT. — The act of the agent of a fire insurance com- 
pany, in issuing a policy on an application alleging uncon- 
ditional ownership, is a waiver of such condition, where 
the agent knows at the time that the property is mort- 
gaged, and that a foreclosure suit is pending. (Decided 
by the Supreme Court of California in the case of Breed- 
love vs. Norwich Union Fire Insurance Co., which decision 
is printed in Volume 2401 the California Reports, page 164.) 

Building Contracts 

Section 256.— CONTRACT MUST BE IN WRITING. 

— In California, all building contracts must be in writing 
when the amount agreed to be paid to the contractor ex- 
ceeds one thousand dollars. 

Code of Civil Procedure, Section 1183. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 1(39 

Section 257.— CONTRACT OR MEMORANDUM TO 
BE RECORDED. — The contract itself, or a memorandum 
of it, must be filed for record in the office of the County 
Recorder of the county or city and county where the prop- 
erty is situated, before the work is commenced. Whether 
the contract or a memorandum of it be filed for record, it 
should contain the names of all the parties to the con- 
tract; a description of the property; a statement of the 
character of the work to be done ; the total amount to be 
paid under the contract ; and the amounts of all partial 
payriients, and the times when payments shall be due and 
payable. All contracts which are not recorded, in the 
manner stated above, are declared by the law of California 
to be wholly void, and no recovery can be had upon the 
contract by either party to it. 

Code of Civil Procedure, Section 1183. 

Section 258.— RECORDER'S FEE.— The law provides 
that the County Recorder shall receive a fee of one dollar 
for filing the contract or memorandum for record. 
Code of Civil Procedure, Section 1183. 

Section 259.— TIME OF PAYMENTS.— The building 
contract must not make any part of the contract price pay- 
able before the work is commenced ; but the contract price 
must, by the terms of the contract, be made payable in 
installrnents at specified times after the commencement of 
the work, or on completion of the whole work. 
Code of Civil Procedure, Section 1184. 

Section 260.— LAST PAYMENT.— The law provides 
that at least twenty-five per cent of the whole contract price 
must be made payable at least thirty-five days after the final 
completion of the contract. This is done to protect the 
liens of laborers, mechanics, and material men, and to pro- 
tect the owner by giving sufficient time for all liens to come 
in before the final payment is to be made by him. 
Code of Civil Procedure, Section 1184. 



170 BUSINESS LAWS FOR BUSINESS MEN. 

Section 261.— CONTRACTOR'S BOND.— The Legisla- 
ture of 1893 passed a law, which provided that every con- 
tract filed for record should be accompanied by a bond in 
an amount equal to at least twenty-five per cent of the 
contract price. This law also provided that the bond 
should be made to apply to the benefit of any and all per- 
sons performing labor or furnishing materials to the con- 
tractor, and that such persons might recover the value 
of labor or materials furnished from the bondsmen, not 
exceeding the amount of the bond, with costs and attor- 
ney fees; and the law also provided, that any failure to 
file the bond would make the owner and contractor both 
liable in damages to any and all material men, laborers, 
and sub-contractors entitled to liens upon the property. 
The law has been generally recognized, and bonds have 
been filed under it, ever since its passage by the Legislature 
in 1893. But the Supreme Court of California has decided 
that the law is unconstitutional and void. In San Fran- 
cisco, Wm. Shaunessy sued the American Surety Co. on 
a contractor's bond, filed under the law^ Shaunessy was a 
material man who furnished materials to the contractor. 
The Supreme Court, on June 20th, 1902, decided that the 
law requiring the bond is unconstitutional, and the bond 
is void. (Decided by the Supreme Court of California in 
the case of Wm. Shaunessy vs. the American Surety Co., 
which decision is printed in Volume 23 of California De- 
cisions, page 800.) 

Section 262.— MATERIALS FURNISHED CON- 
TRACTOR EXEMPT FROM EXECUTION.— Mate- 
rials furnished for use and about to be used in the con- 
struction, alteration, or repair of any building cannot be 
taken tmder attachment or execution, to enforce any debt 
due by the purchaser of such materials, except a debt due 
for the purchase price of the materials. 

Code of Civil Procedure, Section 1196. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 171 

Section 263.— FORM OF BUILDER'S CONTRACT.— 

The following is a form of builder's contract, which is in 
common use in this State, and which meets the require- 
ments of the law in its terms : — 

ARTICLES OF AGREEMENT, Made this .... day of 
iQO. -, Between 



of the , County of , State of Cali- 
fornia, the party of the first part, and 



of the , County of State 

of California, the party of the second part, 

Witnesseth : — The party of the first part will be herein- 
after designated as the Owner, and the party of the second 
part as the Contractor, singular number only being used ; 
and the word Architect used herein in the singular shall 
include the plural, and the masculine the feminine. 

FIRST. — The Contractor agrees, within the space of 

working days from and after the date 

hereof, to furnish the necessary labor and materials, in- 
cluding tools, implements, and appliances required, and 
perform and complete in a workmanlike manner all the .... 



(Here insert description 6f work to be done, under the 

contract, whether woodwork, plastering, plumbing, iron- 
work, 'etc.) 

and other works shown and described in and by, and in 
conformity with, the plans, drawings, and specifications 
for the same made by , the author- 
ized Architect employed by the Owmer, and which are 
signed by the parties hereto. 

SECOND. — Said Architect shall provide and furnish to 
the Contractor all details and working drawings necessary 
to properly delineate said plans and specifications ; and the 
work is to be done and the materials furnished in accord- 
ance therewith under the direction and supervision and 
subject to the approval of said iVrchitect, or a Superintend- 
ent selected and agreed upon by the parties hereto, within 



172 BUSINESS LAWS FOR BUSINESS MEN 

a fair and equitable construction of the true intent and 
meaning of said plans and specifications. 

THIRD. — The time during which the Contractor is de- 
layed in said work by the acts or neglects of the owner or 
his employees, or those under him by contract or other- 
wise, or by the act of God which the Contractor could not 
have reasonably foreseen and provided for, or by stormy 
and inclement weather which delays the work, or by any 
strikes or like trouble among mechanics or laborers which 
delay said work, and which are not caused by, or the con- 
tinuance of which is not due to, any unreasonable acts or 
conduct on the part of the Contractor, shall be added to 
the time for completion as aforesaid. 

FOURTH.— Said building 



to be erected upon a lot of land situated in 

, County of 

State of California, and described as follows : 



(Here insert description of the lot of land.) 



FIFTH. — The Owner agrees, in consideration of the per- 
formance of this agreement by the Contractor, to pa3^ or 
cause to be paid, to the Contractor, his legal representative 

or assigns, the sum of 

(Flere insert contract price.) 

Dollars, in 

United States Gold Coin, at the times and in the manner 

following, to-wit : Dollars when the 

foundation is completed and the framing materials on the 

ground and the frame up ; Dollars 

when the roof and rustic are on ; Dollars 

when the plastering is completed ; and '. 

Dollars thirty-five days after the completion of the build- 
ing and acceptance by the Owner ; 

(Here insert any other condition as to payment desired.) 

Provided, that when each payment or installment shall be- 
come due, and in the final completion of the work, certifi- 
cates in writing shall be obtained from the said Architect, 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 173 

Stating that the payment or instaUment is due or work com- 
pleted, as the case may be, and the amount then due ; and 
the said Architect shall at said times deliver said certificates 
under his hand to the Contractor, or, in lieu of such cer- 
tificates shall deliver to the Contractor in writing under 
his hand, a just and true reason for not issuing the certifi- 
cates, including a statement of the defects, if any, to be 
remedied, to entitle the Contractor to the certificate or 
certificates. And in the event of the failure of the Archi- 
tect to furnish and deliver said certificates, or any of them, 
or in lieu thereof the writing aforesaid, within three days 
after the times aforesaid, and after demand therefor made 
in writing by the Contractor, the amount which may be 
claimed to be due by the Contractor, and stated in the said 
demand made by him for the certificate, shall, at the ex- 
piration of said three days, become due and payable, and 
the Owner shall be liable and bound to pay the same on 
demand. 

In case the Architect delivers the writing aforesaid in 
lieu of the certificate, then a compliance by the Contractor 
wath the requirements of said writing shall entitle the Con- 
tractor to the certificate. 

SIXTH. — For any delay on the part of the Owner in 
making any of the payments or installments provided for 
in this contract after they shall become due and payable, 
he shall be liable to the Contractor for any and all damages 
which the latter may suffer ; and such delay shall, in addi- 
dition, operate as an additional extension of the time for 
completion aforesaid for the length of time of such delay. 
And such delay, if for more than five days after the date 
when said payments or installments shall have respectively 
become due and payable, as in this agreement provided, 
shall, at the option of the Contractor, be held to be pre- 
vention by the Owner of performance of this contract by 
the Contractor. 

SEVEXTH. — The specifications and draw^ings are in- 
tended to cooperate, so that any work exhibited in the 
drawings and not mentioned in the specifications, or vice 
versa, are to be executed the same as if both mentioned in 
the specifications and set forth in the drawings, to the true 
intent and meaning of the said drawings and specifica- 
tions wdien taken together. But no part of said speci- 
fications that is in conflict with any portion of this agree- 
ment, or that is not actually descriptive of the work to 



174 BUSINESS LAWS FOR BUSINESS MEN. 

be done thereunder, or of the manner in which the said 
work is to be executed, shall be considered as any part 
of this agreement, but shall be utterly null and void. 

EIGHTH. — Should the Owner or the Architect at any 
time during the progress of the work, request any altera- 
tions or deviations in, additions to, or omissions from, this 
contract, or the plans or specifications, either of them shall 
be at liberty to do so, and the same shall in no way affect 
or make void this contract; but the amount thereof shall 
be added to, or deducted from, the amount of the contract 
price aforesaid, as the case may be, by a fair and reasonable 
valuation. And this contract shall be held to be completed 
when the work is finished in accordance with the original 
plans, as amended by such changes, whatever may be the 
nature or extent thereof. 

NINTH. — The rule of practice to be observed in the ful- 
filment of the last foregoing paragraph (eighth) shall be 
that, upon the demand of either the Contractor, Owner, or 
Architect, the character and valuation of any or all changes, 
omissions, or extra work, shall be agreed upon and fixed in 
writing, signed by the Owner, Architect, and the Contractor, 
prior to execution. 

TENTH. — Should any dispute arise between the Owner 
and Contractor, or between the Contractor and Architect, 
respecting the true construction of the drawings and speci- 
fications, the same shall, in the first instance, be decided 
by the Architect; but should either of the parties hereto 
be dissatisfied with the justice of such decision, or should 
any dispute arise between the parties hereto respecting 
the valuation of the extra work, work done, or work omit- 
ted, the disputed matter shall be referred to, and decided b>, 
two competent persons who are experts in the business of 
building, — one to be selected by the Owner or Architect, 
and the other by the Contractor; and, in case they cannot 
agree, these tw^o shall select an umpire, and the decision 
of any two of them shall be binding on all parties. 

ELEVENTH.— Should the Contractor fail to complete 
this contract, and the works provided for therein, within 
the time fixed for such completion, due allowance being 
made for the contingencies provided for herein, he shall 
become liable to the owner for all loss and damages Avhich 
the latter may suflfer on account thereof, but not to exceed 

the sum of $ per day for each day said work shall 

remain uncompleted beyond such time for completion. 



BUSINESS CONTRACTS AND LE:GAL OBLIGATIONS. 175 

TWELFTH. — In case said work herein provided for 
should, before completion, be wholly destroyed by fire, 
defective soil, earthquake, or other act of God which the 
Contractor could not have reasonably foreseen and pro- 
vided for, then the loss occasioned thereby shall be sus- 
tained by the Owner to the extent that he has paid install- 
ments thereon, or that may be due under the fifth clause 
of this contract; and the loss occasioned thereby, and to 
be sustained by the Contractor, shall be for the uncom- 
pleted portion of said work upon which he may be engaged 
at the time of the loss, and for which no payment is yet 
due under said fifth clause of this contract. 

In the event of a partial destruction of said work -by any 
of the causes above named, then the loss to be sustained 
by the Owner shall be in the proportion that the amounts 
of installments paid or due bears to the total amount of 
work done and materials furnished, estimated according to 
said contract price, and the balance of said loss to be 
sustained by the Contractor. 

THIRTEENTH. — The payment of the progress pay- 
ments by the Owner shall not be construed as an absolute 
acceptance of the work done up to the time of such pay- 
ments ; but the entire work is to be subjected to inspection 
and approval of the Architect or Superintendent at the time 
when it shall be claimed by the Contractor that the con- 
tract and works are completed ; but the Architect or Su- 
perintendent shall exercise all reasonable diligence in the 
discovery, and report to the Contractor, as the work pro- 
gresses, of materials and labor which are not satisfactory 
to the Architect or Superintendent, so as to avoid unneces- 
sary trouble and cost to the Contractor in making good 
defective parts. 

FOURTEENTH.— Should the Contractor, at any time 
during the progress of the w^ork, refuse or neglect, without 
the fault of the Owner, Architect, or Superintendent, to 
supply a sufficiency of materials or workmen to complete 
the contract within the time limited herein, or any lawful 
extension thereof, for a period of more than three days after 
having been notified by the Owner in writing to furnish 
the same, the Owner shall have power to furnish and pro- 
vide said materials or workmen to finish the said work ; 
and the reasonable expenses thereof shall be deducted from 
the amount of the contract price. 

IN WITNESS WHEREOF, the said parties to these 



176 BUSINI5SS LAWS I^OR BUSINESS MEN. 

presents have hereunto set their hands and seals, the day 

and year first ^bove written. 

(Seah) 

(Seal.) 

Section 264.— REFERENCE TO PLANS AND SPECI- 
FICATIONS IN CONTRACT.— Where a building con- 
tract provides that the contractor shall do the work ac- 
cording to certain draw^ings and specifications, which are 
referred to in the contract as "hereto annexed/' the draw- 
ings and specifications are an essential part of the contract, 
and until they are annexed the contract is not complete ; 
and it is essential that the drawings and specifications 
referred to in the contract should be filed in the Recorder's 
ofifice, together with the contract, and a failure to file them 
destroys the validity of the contract. 

Section 265.— WHEN CONTRACT WHOLLY VOID. 

— The failure to file the contract, or a memorandum con- 
taining the statements required by the law above men- 
tioned, in the office of the County Recorder, renders the 
contract wholly void for all purposes. It cannot then be 
the basis of a recovery by the contractor against the owner, 
nor can it be looked to for the purpose of determining the 
amount for which the owner is liable, or when payment 
is to be made. In any action against him by a laborer 
or material man, their rights will be determined by other 
rules, and irrespective of any provision of such contract. 

Section 266.— DEFECTS WHICH WILL NOT MAKE 
CONTRACT VOID.— The law of California does not make 
a contract void for any other defect or default than a failure 
to record it. The contract is not rendered void by the fact 
that the final payment is specified to become due thirty 
days after the completion of the building, instead of thirty- 
five days, as provided by law ; nor is the contract ren- 
dered void by the fact that the property or lot is erroneously 



P.USINESS CONTRACTS AND LKCAL OBLIGATIONS. 177 

described ; and, indeed, the statute only declares the con- 
tract void for one reason, failure to file it, or a memorandum 
of it, in the office of the County Recorder. 

Section 267.— TWENTY-FIVE PER CENT RE- 
SERVED.— The owner of a building, after its completion 
by the contractor, must reserve in his hands twenty-five 
per cent of the whole contract price for thirty-five days, 
for payment to the contractor or lien-claimant, whichever 
is entitled to it; and if there is a contest between the con- 
tractor and any person who has filed a lien, the owner 
should deposit the money in court, to be awarded to the 
party entitled to it. 

Section 268.— BUILDING CONTRACT WHERE 
PRICE DOES NOT EXCEED ONE THOUSAND 
DOLLARS. — A building contract, where the price does 
not exceed one thousand dollars, and where the work is 
to be done within a year, may be entered into orally. The 
law relative to the mode of payment of the contract price 
of a building does not apply to such contracts when the 
price does not exceed one thousand dollars, but applies only 
to such contracts when the price exceeds that sum. No 
part of the contract price under a building contract, when 
the price does not exceed one thousand dollars, need be 
withheld by the owner, and he may pay the whole of it to 
the contractor before the commencement or after the com- 
pletion of the work, unless he is notified not to do so by 
some person who claims a lien. 

Section 269.— CONTRACT OF MINOR.— A minor is 
not bound by his contract for the erection or repair of a 
building. A minor is only bound by his contracts in cer- 
tain cases, which form exceptions to the general rule that 
minors cannot make contracts, in which the erection of a 
building is not included. 

12 



178 BUSINESS LAWS FOR BUSINESS M?^. 

Section 270.— PRICE WHERE CONTRACTOR 
ABANDONS THE WORK.— If the contract for the erec- 
tion and completion of a building is entire, and the con- 
tractor abandons the work before it is completed, he loses 
the right which he would have had to the full compensation 
agreed on. 

Section 271.— OWNER PREVENTING WORK.— 

Where a contractor has proceeded to construct a building 
of the material and in the manner substantially as provided 
for in the contract, and the owner before completion of 
the contract, and without cause, and in violation of the 
contract, refuses to allow the contractor to go on, and 
takes possession of the building, and appropriates to his 
own use the materials on hand for the construction of the 
building, the contractor is entitled to treat the contract as 
rescinded. And in other circumstances, where acts of simi- 
lar character by the owner prevent the contractor from 
completing the work as agreed upon, the contractor may 
look upon the contract as rescinded. In all such cases, 
the contractor may recover from the owner the reasonable 
value of the work performed and material furnished by him. 

Section 272.— NOTICE TO OWNER.— The law requires 
recording of a building contract, where the price exceeds 
one thousand dollars, as a condition of its validity, and 
forbids any payment by the owner to the contractor as 
against material-men and laborers, unless the contract is 
recorded. No notice to the owner to stop payments to the 
contractor is required, unless there is a valid contract. If 
the contract is not recorded, it is void, and no notice to 
the owner is necessary. 

Section 273.— ACCEPTANCE BY AGENT.— Where the 
parties to a building contract agree upon an agent, who is 
authorized to accept or reject the work when completed. 



BUSINESS CONTRACTS AND LI:GAL OBLIGATIONS. 179 

his acceptance is binding upon both parties ; and where 
the agent acts in good faith, and without practicing any 
fraud upon either party to the contract, his acceptance of 
the work is final and conclusive. 

Section 274.— BREACH OF CONTRACT BY OWNER. 

— Where a contractor agrees to perform certain work and 
furnish certain materials for the construction of a building, 
and after furnishing a portion of the materials the owner 
of the building stops the work, and fails to receive any 
further material from the contractor, the owner is liable 
to the contractor in damages. The contractor may recover 
from the owner as damages all the profits he would have 
made if the work had gone on and the materials had been 
received from him. 

Section 275.— AGREEMENT AS TO EXTRA WORK. 

— AVhere a building contract provides that "no extra work 
is to be paid for except by contract in writing," the parties 
may A^erbally rescind this provision, at any time, and agree 
to alterations. Where alterations are made by agreement, 
written or verbal, the original contract is not set aside, but 
is only modified to the extent of the change in the plans. 

Section 276.— LOSS BY FIRE BEFORE COMPLE- 
TION. — Where, by the terms of a building contract, the 
third and last installments of payment for the work are 
conditioned upon its completion according to agreement 
and specifications, such installments cannot be recovered 
where the whole work is consumed by fire, without apparent 
fault of either party, before its completion. A question 
will arise under such circumstances as to whether the 
building was substantially completed at the time of the 
fire. In a suit between a contractor and owner, at San 
Francisco, the Supreme Court of California decided that 
where it was proved that no part of the second coat of 



180 BUSINESS LAWS FOR BUSINESS MEN. 

paint required by the contract had been put on ; that the 
work bench of the carpenters and the paint for the second 
coat were in the building at the time of the fire; that two 
of the doors were unhung, and no fastenings put on the 
front door or windows ; and that the house had not been 
dehvered nor accepted ; the building wais not substantially 
completed before the fire. (Decided by the Supreme Court 
of California in the case of Clark vs. Collier, which decision 
is printed in Volume lOO of the California Reports, page 
256.) So many things were lacking in the case quoted, 
that it would have been surprising indeed if the Supreme 
Court had decided that the work was substantially per- 
formed ; and in all cases the question, whether a contract 
has been substantially performed before a fire, will depend 
upon the terms of the contract and a reasonable considera- 
tion of the work done and remaining to be done. 

Section 277.— CONTRACT PROVIDING FOR ARBI- 
TRATION. — Where a building contract provides for the 
arbitration of any matter, the contractor must first demand 
an arbitration before he can sue for his pay for the work 
included in the provision for arbitration. For instance, 
the contractor is not entitled to recover for extra work, or 
for materials furnished, when the contract provides that 
claims for such extras must be submitted to arbitration, 
and the contractor has made no offer or request to arbi- 
trate. The contractor must offer in good faith to arbitrate, 
and if the owner refuses, he may then sue for and recover 
the value of the extra work, regardless of the arbitration 
clause. 

Section 278.— SUIT FOR REASONABLE VALUE 
OF WORK AND MATERIALS.— Although a written 
contract, required by the law where the contract price is 
for more than one thousand dollars, was not recorded, and 
is therefore void for all purposes, yet the contractor is not 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 181 

lO go without his money. He may sue the owner for the 
reasonable value of the labor and materials furnished, and 
the courts will give him judgment for the amount. The 
written contract, by reason of not being filed for record, 
is absolutely void, and cannot be put in evidence to prove 
the value of the Vv^ork or materials furnished by the con- 
tractor. The value, in such a suit, will have to be proved 
by the testimony of people who are familiar with the work 
and materials, and their value at the particular place ; and, 
of course, the testimony of the contractor, or the architect, 
will have much weight in determining the value of the 
work and materials. 

Section 27.9.— INVALID MEMORANDUM.— Where 
the memorandum of a building contract, filed with the 
County Recorder, does not state of what material the 
building is to be constructed, whether of wood, brick, stone, 
or iron, but merely describes it as a building of a certain 
size, to be constructed in a workmanlike manner accord- 
ing to plans and specifications, and a copy of the plans 
and specifications is not filed or inserted in the memo- 
randum, the contract is void. The contract is void upon 
the ground that the memorandum does not contain a suf- 
ficient statement of the general character of the work to 
be done. The law is very strict with reference to building 
contracts, because the rights of the parties to a building 
contract are entirely statutory. The express provision of 
the law is, if the contract or a valid memorandum thereof 
is not filed with the County Recorder, the contract is void. 

Section 280.— SUBSTANTIAL PERFORMANCE.— In 

certain cases, the contractor, although he has not com- 
pleted the work literally as called for by the contract, yet 
may recover from the owner the contract price, less dam- 
ages suffered by the owner from the contractor's failure to 
do the work as contracted for. But the contractor must 



182 BUSINESS LAWS FOR BUSINESS MEN. 

show in such cases that the failure was not by his own 
fault; that he endeavored and intended in good faith to do 
the work exactly as contracted for; and he must also be 
able to show that the work has been in every material 
particular performed substantially in the manner called 
for by the contract. The contractor must have intended 
in good faith to comply with the terms of the contract. 
The spirit of the contract must be faithfully observed, 
though the very letter of it fail. Good faith alone, however, 
is not enough. The owner has a right to a structure in all 
essential particulars such as he has contracted for, and to 
authorize a court or jury to find that there has been a 
substantial performance, it must be found that he has such 
a structure. The court cannot say that anything is im- 
material, which the parties have made material by their 
own agreement. The owner has a right to have the struc- 
ture he contracted for, and not another; and even his 
caprices, if expressed in the contract, must be complied 
with, even though they do not add to the value of the 
building, or may have lessened its value. It is only where 
the plan has been substantially embodied in the work that 
the contractor will have a remedy for substantial perform- 
ance. The omissions or deviations from the plans must 
be the result of a mistake or inadvertence, and not inten- 
tional, much less fraudulent ; and they must be slight or 
susceptible of remedy, so that an allowance out of the 
contract price will give the owner substanti^illy what he 
contracted for. Some of the things which will not be con- 
sidered as substantial performance of a building contract 
are mentioned in the suit brought at San Francisco by 
Edw^ard H. Perry against Thomas M. Quackenbush, and 
decided by the Supreme Court of California. The con- 
tractor agreed in the construction of the foundation to 
use good, hard brick and lay seven courses, and to con- 
struct tw^elve piers of brick laid in six courses. In viola- 
tion of the agreement, he used old, second-hand brick of 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 183 

poor quality, that had been used in other buihiings, and 
laid the same in courses of five and six instead of seven, 
and constructed only six piers of brick of the same kind 
laid in three courses. He agreed to use in the construc- 
tion of the frame of said building the best kind of lumber; 
contrary to his agreement, he used only second-class lum- 
ber and second-hand and refuse lumber that had been used 
in other buildings. He agreed to use in the construction 
of ihe roof the best quality of shingles ; contrary to his 
agreement, he used second-hand lumber and second-class 
shingles. He agreed to paint the building with two coats 
of metallic paint, but used no metallic paint at all, but 
cheap and inferior paint. The vSupreme Court held that 
these facts shoAved that the contractor had in no sense sub- 
stantially performed his agreement, but that he had inten- 
tionally and wilfully departed from it. (Decided by the 
Supreme Court of California in the case of Edward H. 
Perry vs. Thomas M. Quackenbush, which decision is 
printed in Volume 105 of the California Reports, page 299.) 

Section 281.— OWNER NOT LIABLE FOR DAM- 
AGES ON UNRECORDED CONTRACT.— A contractor 
for the erection of a building cannot maintain a suit against 
the owner to recover damages for not being, allowed to 
complete the building, if the contract price was over one 
thousand dollars, and the contract was not filed for record 
as required by the law. 

Section 282.— RIGHT OF CONTRACTOR TO ABAN- 
DON WORK. — If the owner prevents the progress of the 
work, or fails to furnish materials with which the work 
can be done, where the owner is to furnish the materials, 
or fails to pay an installment of the price when it becomes 
due, the contractor has the right to abandon the work and 
sue the owner for the reasonable value of his work and 
materials. The contractor has no right to leave the work 



184 BUSINESS LAWS FOR BUSINESS MEN 

without cause; and if, when he makes a demand for an 
installment of the price, he has not performed the contract 
according to its terms, the installment is not legally due, 
and he will not be justified in leaving the work on the 
ground of non-payment. 

Section 283.— MATERIAL DEPARTURE FROM 
SPECIFICATIONS.— A building contractor must stick 
close to the plans and specifications, and must make no 
changes or deviations without the consent of the owner. 
Any material departure from the plans and specifications 
by the contractor will render him liable to the owner in 
damages, and may give the owner the right to rescind the 
contract altogether. Where a building contract called for 
laths one and one-quarter inches wide, and laths one and 
one-half inches wide were used, and the contract called 
for No. I rustic and the best quality of joists and studding, 
and the contractor used second quality of joists and stud- 
ding and No. 2 rustic, it has been decided by our Supreme 
Court that there was a substantial and material departure 
from the specifications of the contract. 

Section 284.— EXCAVATIONS.— The question whether 
the owner of land will be liable in damages, for injury to 
adjoining property, caused by excavating, will depend m 
every case upon the manner of making the excavation. 
The owner of a lot in making excavations must use due 
care. If one by carelessness in making excavations on 
his own land causes injury to an adjoining building, even 
where the owner of the house has no easement of support, 
he will be liable in damages. The law exacts from a per- 
son who undertakes even a lawful act on his own premises 
from which injury might be apprehended to the property 
of his neighbor, the exercise of a degree of care measured 
by the danger, to prevent or lessen the injury. The gen- 
eral rule is, that no one has absolute freedom in the use 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 185 

of his property, but is restrained by the coexistence of 
equal rights of his neighbor to the use of his property, so 
that each in exercising his right must do no act which 
causes injury to his neighbor. But if the owner of the 
land, in making excavations, performs the work in a proper 
and careful manner, he will not be liable for injury to the 
premises of an adjoining owner. He is required only to 
take reasonable precaution to sustain the land of the ad- 
joining owner. The adjoining owner must also take pre- 
caution to sustain his own walls, after notice of the intended 
excavations. The party intending to make excavations 
must give notice to the adjoining owner. This notice may 
be verbal or written. The notice is not required to be 
in any particular form. In one case decided by the Su- 
preme Court of California, it was held that the following 
notice was entirely sufficient: "Dear Madam : As we are 
about to excavate the premises on the southeast corner of 
Haight and Devisadero Streets, directly adjoining your 
lot, to a depth somewhat below your foundation, you are 
hereby notified to take the necessary measures to protect 
your property. Very respectfully, Cunningham Bros., 
Architects. For Christian Warneke." (Decided by the 
Supreme Court of California, in the case of Nippert vs. 
Warneke, which decision is reported in Volume 128 of the 
California Reports, page 501.) 

► Civil Code, Section 832. 

Mechanic's Liens 

Section 285.— THE PERSONS ENTITLED TO 
LIENS. — The Legislature has provided for a class of per- 
sons who may have preferred liens upon real property for 
the money due them. The statute includes mechanics, 
material-men, contractors, sub-contractors, architects, ma- 
chinists, builders, miners, and all persons and laborers of 
<^very class performing labor upon or furnishing materials 



186 BUSINESS LAWS FOR BUSINESS MEN. 

to be used in the construction, alteration, addition to or 
repair of any building, wharf, bridge, ditch, flume, aqueduct, 
well, tunnel, fence, machinery, railroad, wagon road, or 
other structure, as the persons who are entitled to a lien 
upon the property for the value of their labor or materials 
furnished. 

Code of Civil Procedure, Section 1183. 

Section 286.— TO V/HAT LIEN EXTENDS.— In case 
of a contract for the work, between the reputed owner 
and the contractor, the lien extends to the entire contract 
price, and such contract operates as a lien in favor of all 
persons, except the contractor, to the extent of the whole 
contract price ; and after all other liens are satisfied, the 
contractor himself may have a lien for any balance due 
in his own favor. 

Code of Civil Procedure, Section 1183. 

Section 287.— ADVANCE PAYMENTS DO NOT AF- 
FECT LIEN. — No payment made before it is due, under 
the terms and conditions of the contract, will be allowed 
to defeat or affect any lien in favor of any person, except 
the contractor. As to all persons except the contractor 
himself, all advance payments, or payments made before 
they are due under the contract, are considered by the law 
as if they had never been made, and the amount is still 
applicable to liens, even where the contractor to whom 
the money was paid afterwards abandons his contract or 
becomes liable to the owner for damages for not preform- 
ing it. The owner will take his chances, if he pays the 
contractor in advance, and cannot be allowed to thus shut 
out any lienholder and deprive him of the benefit of the 
money due on the contract. 

Code of Civil Procedure, Section 1184. 



busine:ss contracts and ldgal obligations. 187 

Section 288.— ALTERATION OF CONTRACT DOES 
NOT AFFECT LIEN.— No alteration of a building con- 
tract affects any lien provided for by the law. 

Section 289.— NOTICE TO REPUTED OWNER.— Any 

of the persons entitled to liens mentioned in Section 284, 
except the contractor, may at any time give to the reputed 
owner of the property a notice in writing that they have 
performed labor or furnished materials, or both, to the 
contractor or other person acting by authority of the 
reputed OAvner. The notice must state in general terms 
the kind of labor and materials, the name of the person to 
whom they were furnished, the name of the person who 
performed the labor or furnished the materials, and the 
value of the labor or materials already furnished and that 
agreed to be furnished. The written notice must be de- 
livered to the reputed owner personally, or by leaving it 
at his residence or place of business, with some person in 
charge, or by delivering it to his architects, or by leaving 
it at their residence or place of business, with some person 
in charge, or by posting it in a conspicuous place upon 
the claim or improvement. No such notice is invalid by 
reason of any defect of form, provided it is sufficient to 
inform the reputed owner of the matters above stated, or 
to put him upon inquiry as to such matters. Upon such 
notice being given, it shall be the duty of the person who 
contracted with the contractor to withhold from him suffi- 
cient money due or that may become due to answer any 
claim and any lien that may be filed. 

Code of Civil Procedure, Section 1184. 

Section 290.— WHAT INTEREST IN THE LAND 
SUBJECT TO THE LIEN.— The land upon which any 
building, improvement, well, or structure is constructed, 
together with a convenient space about the premises, so 



188 busine:ss laws for business me:n. 

much as may be required for convenient use and occupa- 
tion, is subject to the Hen; provided, that at the time of 
the commencement of the work, or when the materials 
were furnished, the land belonged to the person who caused 
the work to be done or materials furnished. If the land, 
at the time of the commencement of the work, or when 
the materials were furnished, did not belong in fee simple 
to the person who caused the w^ork to be done or materials 
furnished, then only his interest in the land, whatever it 
was, is subject to the lien. 

Code of Civil Procedure, Section 1185. 

Section 291.— EFFECT OF MECHANIC'S LIEN.— 

Mechanic's liens are preferred liens. That is, they must 
be satisfied before any mortgage, or other encumbrance, 
put on the property after the date when the building or 
other structure was commenced, or work done, or materials 
commenced to be furnished; and a mechanic's lien must 
be paid before any lien, mortgage, or other encumbrance 
of which the lienholder had no notice, and which was 
unrecorded at the time the building or other structure was 
commenced, work done, or materials commenced to be 
furnished. 

Code of Civil Procedure, Section 1186. 

Section 292.— OWNER'S NOTICE OF COMPLE- 
TION. — Under the law, the owner of the building or other 
structure must, within ten days after the completion of the 
contract, or within forty days after cessation from labor 
upon any unfinished contract, or upon any unfinished build- 
ing, file for record in the office of the County Recorder 
of the county in which the property is situated a written 
notice of completion. This notice by the owner must state 
the date when the building was actually completed, or in 
case of cessation from labor for thirty days, the date on 
which labor actually ceased; the name and the nature of 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 189 

the title to the property of the person who caused the 
building or other structure to be erected or repaired or 
altered or added to ; and also a description of the property 
sufficient for identification. The notice must be sworn 
to by the owner or some other person in his behalf. 
Code of Civil Procedure, Section 1187. 

Section 293.— EFFECT OF FAILURE TO FILE 
OWNER'S NOTICE.— If the owner neglects to file the 
notice of completion for record, the law provides, as a 
penalty for this failure, that he cannot make any defense 
to a suit to foreclose a mechanic's lien on the ground that 
the lien was not filed in time. 

Section 294.— FEE FOR RECORDING OWNER'S 
NOTICE. — The fee to be paid the County Recorder, for 
recording the owner's notice of completion, is the sum of 
one dollar. 

Section 295.— TIME WITHIN WHICH ORIGINAL 
CONTRACTOR MAY FILE LIEN.— Every original con- 
tractor, at any time after the completion of his contract, 
and until the expiration of sixty days after the filing of the 
owner's notice, may file a lien on the property; provided, 
all liens must be filed within ninety days after completion. 
Code of Civil Procedure, Section 1187. 

Section 296.— TIME WITHIN WHICH MECHANIC, 
MATERIAL-MAN, OR LABORER MAY FILE LIEN. 

— Every person, except the original contractor, claiming 
the benefit of the lien law, may file a lien on the property 
at any time after the completion of the building or struc- 
ture, or completion of any alteration, addition, or repairs, 
and until the expiration of thirty days after the filing of 



190 BUSINESS LAWS FOR BUSINESS MEN. 

the owner's notice; provided, all liens must be filed within 
ninety days after completion. 

Code of Civil Procedure, Section 1187. 

Section 297.— TIME WITHIN WHICH MINER MAY 
FILE LIEN. — Every person who has performed labor in 
a mining claim, may file a lien on the property to secure 
his pay, at any time within thirty days after the completion 
of his labor. 

Code of Civil Procedure, Section 1187. 

Section 298.— CLAIM OF LIEN TO BE FILED IN 
RECORDER'S OFFICE.— The claim of lien must be filed 
for record with the County Recorder of the county where 
the property or some part of it is situated. The claim of 
lien must be in writing, and the law specifies the particular 
statements i^ must contain. It must contain, first, a state- 
ment of the demand for which the lien is filed, giving the 
amount after deducting all just credits and offsets. It 
must also contain the name of the owner or reputed owner 
of the property, if known, and also the name of the person 
by whom the claimant was employed, or to whom he fur- 
nished the materials, with a statement of the terms, time 
given, and conditions of his contract. The claim must 
also contain a description of the propert}^ to be charged 
with the lien, sufficient for identification. The claim must 
be verified, and should be sworn to by the claimant. 
Code of Civil Procedure, Section 1187. 

Section 299.— OCCUPATION OR USE OF BUILDING 
EQUIVALENT TO COMPLETION.— In all cases the 
occupation or use of a building, or structure, by the owner 
or his agent, will be deemed equivalent to its completion 
for all the purposes of the lien law. So, also, acceptance 
of the building by the owner or his agent, and cessation 
from labor for thirty days upon any contract, or on any 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 191 

building or structure, will be deemed equivalent to its com- 
pletion. 

Code of Civil Procedure, Section 1187. 

Section 300.— LIENS UPON TWO OR MORE PIECES 
OF PROPERTY. — In every case in which one claim is 
filed against two or more separate and distinct buildings, 
mining claims, or other improvements, owned by the same 
person, the claim filed must designate the amount due on 
each of such buildings, mining claims, or other improve- 
ments ; and if this is not done, the lien of such claim is 
postponed to other liens. The lien of such claim does not 
extend beyond the amount designated, upon either of such 
buildings, or other improvements, or upon the land, as 
against other creditors having liens by judgment, mort- 
gage, or otherwise. 

Code of Civil Procedure, Section 1188. 

Section 301.— WHEN SUIT MUST BE COMMENCED 
TO FORECLOSE LIEN.— A suit to foreclose a lien upon 
any building, mining claim, improvement, or structure, 
must be commenced within ninety days after the claim of 
lien was filed for record ; or, if a credit be given to the 
owner, then the suit must be commenced within ninety 
days after the expiration of the term of credit; but no lien 
contiiTues in force for a longer time than two years from 
the time the work is completed, by any agreement to give 
credit. 

Code of Civil Procedure, Section 1190. 

Section 302.— LIENS ON LOTS IN INCORPORATlSD 
CITIES AND TOWNS.— Any person who, at the request 
of the reputed owner of any lot in any incorporated city 
or town in California, grades, fills in, or otherwise improves 
the lot, or the street or sidewalk in front of or adjoining it, 
or who constructs any areas, vaults, cellars, or rooms, under 



192 BUSINESS LAWS EOR BUSINESS MEN. 

the sidewalk, or makes any improvements in connection 
therewith, has a lien upon such lot for his work done and 
materials furnished. A claim of lien should be filed in the 
Recorder's office, although the statute does not speak of 
filing a claim for such a lien. 

Code of Civil Procedure, Section 1191. 

Section 303.— NOTICE BY OWNER THAT HE WILL 

NOT BE RESPONSIBLE.— Sub-contractors may make 
the owner's property liable to liens, for buildings or other 
improvements put on his land with his knowledge, if the 
owner stands carelessly by and takes no action to protect 
himself. The law provides that the owner may, within 
three days after he has obtained knowledge of the build- 
ing operations, give notice that he will not be responsible 
for the same. The notice must be in writing, and must 
be posted in some conspicuous place on the land, or on 
the building or other improvement situated there. The 
posting of a notice on land within three days after the actual 
commencement of the erection of any building or improve- 
ment thereon, stating that the owner of said land will not 
be responsible for the same, is sufficient, and will relieve 
the owner and the land from any liability for such improve- 
ment, notwithstanding the owner had knowledge of the 
intended improvement long prior thereto. (Decided by 
the Supreme Court in the case of Birch & Co. vs. Magic 
Transit Co., which decision is printed in Volume 26, No. 
1402, California Decisions, page 93.) 

Code of Civil Procedure, Section 1192. 

Section 304.— MEASURE OF RECOVERY BY CON- 
TRACTOR. — The contractor is entitled to recover upon 
a lien filed by him only such amount as may be due to 
him according to the terms of his contract, after deducting 
all claims of other parties for work done and materials 
furnished. 

Code of Civil Procedure, Section 1193. 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 193 

Section 305.— CONTRACTOR MUST DEFEND SUITS 
ON LIENS AT HIS OWN EXPENSE.— In all cases 
where a lien is filed for work done or materials furnished 
to any contractor, he must defend any suit brought to fore- 
close the lien, at his own expense. While any such suit is 
going on, the owner may withhold from the contractor the 
amount of money for which the suit was filed ; and in case 
of judgment against the owner or his property, upon the 
lien, the owner is entitled to deduct the amount of the 
judgment and costs from the amount due or to become 
due by him to the contractor. If the amount of the judg- 
ment exceeds the amount due by him to the contractor, or 
if the owner has already settled with the contractor in full, 
he is entitled to sue and recover from the contractor any 
amount paid by him in excess of the contract price. 
Code of Civil Procedure, Section 1193. 

Section 306.— ORDER IN WHICH LIENS APPLY.— 

vVhere different liens are filed against any property, by a 
number of persons, the law declares which shall have the 
preference, and divides them as follows, and they have the 
preference in the order named : First — All persons perform- 
ing manual labor. Second — Persons furnishing materials. 
Third — Sub-contractors. Fourth — Original contractors. 
Where ^the liens are foreclosed, the proceeds of the sale 
of the property must be applied to each lien or class of 
liens in the order of its rank, as above stated. 
Code of Civil Procedure, Section 1194. 

Section 307.— LIEN MAY BE WAIVED AND PER- 
SONAL ACTION BROUGHT.— The laborer, mechanic, or 
material-man, to whom money is due on a building con- 
tract, is not compelled to file a lien or seek to recover his 
money in that way. He may bring a personal action against 
'.he owner or contractor, who is indebted to him, for the 

13 



194 busine:ss laws for busine:ss men. 

unpaid portion of the contract price, without seeking to 
enforce a Hen against the building. 

Code of Civil Procedure, Section 1197. 

Section 308.— WHAT IS APPLIED TO LIENS WHEN 
CONTRACTOR ABANDONS THE WORK.— If the con- 
tractor fails to perform his contract in full, or abandons 
the work before completion, the portion of the contract 
applicable to the liens of other persons is fixed by esti- 
mating the value of the work already done and materials 
furnished, including materials then actually delivered or 
on the ground, and deducting the payments then due and 
actually paid to the contractor; and the remaining portion 
of the contract price must be applied to such liens. In such 
cases, the value of the work already done and materials 
furnished must be estimated as near as may be by the 
standard of the whole contract price. 

Code of Civil Procedure, Section 1200. 

Section 309. — FALSE CLAIMS. — Any person who in- 
tentionally gives a false notice of his claim to the owner, 
forfeits his lien. Any person who intentionally includes 
in his claim, filed with the County Recorder, work not 
performed or materials not furnished for the property de- 
scribed in the claim, forfeits his lien. 

Code of Civil Procedure, Section 1202. 

Section 310.— CONSPIRACY BETWEEN OWNER 
AND CONTRACTOR.— If the owner and contractor con- 
spire together and make the written contract filed show 
the contract price to be less than it really is, then the 
contract is wholly void ; and in all such cases the labor done 
and materials furnished by all persons, except the con- 
tractor, are deemed in law to have been done and furnished 
at the personal request of the 'owner, and liens can be fil-d 
for the work or materials furnished. 

Code of Civil Procedure, Section 1202 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 195 

Section 311.— BUILDING CONSTRUCTED UNDER 
DISTINCT CONTRACTS— WHO IS ORIGINAL CON- 
TRACTOR. — Where a building is constructed under dis- 
tinct contracts for the different departments of work 
involved, each person contracted with is an original con- 
tractor, and can file his claim of lien within sixty days after 
the completion o£ his contract, irrespective of the time when 
the entire building is completed. The provisions of the 
Code relating to mechanic's liens do not contemplate that 
there can be no original contractor except for the entire 
work of constructing the building. For the purpose of con- 
structing the building, the owner may enter into different 
original contracts, for the different departments of work 
involved. If the owner should enter into a contract with 
one person for the construction of a building in all its parts, 
except the painting, and should afterwards enter into a 
contract with another person to do the painting of the 
building, each of these individuals would be an original 
contractor, within the meaning of the law. The laborers 
and material-men under each contractor would be entitled 
to a lien, and it would be immaterial when the building 
was completed. The contract price with each contractor 
would be the limit of the owner's liability for such liens. 

Section 312.— ALLOWANCE OF INTEREST.— Where 

':he contract prescribes the time of payments, and a suit 
is brought to foreclose a lien, the court will allow interest 
on the amount found due from the time when it should 
have been paid to the date of entering the judgment, at 
the rate of seven per cent per annum ; and, where no time 
for payment is specified in the contract, interest will be 
allowed from the date when the complaint to foreclose the 
lien was filed in the Clerk's office. 



Section 313.— ALLOWANCE OF ATTORNEY'S 
FEES. — The court will allow, in suits to foreclose liens. 



196 BUSINESS LAWS FOR BUSINESS MEN. 

a reasonable attorney's fee to each lien claimant whose 
lien is established. Attorney's fees will be allowed in both 
the Superior and Supreme Courts. The fees are fixed by 
the court, who will allow such sums as may seem to be 
just, considering the amount of work performed by the 
attorney and the amount involved. 

Section 314.— WHEN LIEN FOR MATERIALS BE- 
GINS. — A lien for the furnishing of materials relates to 
the date of beginning to furnish them, and includes all 
the materials thereafter furnished for the building; and 
such lien has priority over a mortgage executed after the 
date of the commencement to furnish the materials. 

Section 315.— PARTNERSHIP CLAIM.— A partner- 
ship cannot claim a building lien for the materials furnished 
under contract with an individual member of the firm, nor 
can such member indirectly claim a lien as a member of 
the firm. 

Section 316.— WHEN CONTRACTOR NOT ENTI- 
TLED TO LIEN. — A contractor who has entered into a 
written contract with the ow^ner of land for the construc- 
tion of a building for an amount in excess of one thousand 
dollars, but who fails to have the contract recorded, is not 
entitled to a lien for the value of the work done. He can 
only recover a personal judgment against the owner of 
the building for the value of his work and labor, without 
any allowance for counsel fees or expenses of preparing 
and recording a mechanic's lien. 

Section 317.— DEDUCTION BY OWNER OF 
AMOUNT OF FORECLOSED LIEN.— It is the duty 
of the contractor to protect the property of the ov/ner 
against any lien preferred by sub-contractors, laborers, or 
material-men employed by him; and the owner is entitled 



BUSINESS CONTRACTS AND LE:GAL OBLIGATIONS. 197 

to deduct from any amount due to the contractor the 
amount of the judgment and costs, including attorney's 
fees, recovered upon foreclosure of the lien of a sub- 
contractor. 

Section 318.— LIEN FOR MOVING A HOUSE.— Un- 
der Section 1183 of the Code of Civil Procedure, a contractor 
performing labor upon a house, by moving it from one 
place to another, is entitled to a lien thereon. 

Section 319.— LIEN ON HOMESTEAD.— A mechanic's 
lien may be created on a homestead without the joint action 
of husband and wife. A homestead is free from forced 
sale, e:^cept as provided by the statute. Among the cases 
in which a homestead may be sold under execution, pre- 
cisely as though it was not a homestead, are those under 
judgments obtained upon debts secured by the liens of 
''mechanics, contractors, artisans, architects, builders, 
laborers of every class, and material-men." 

Section 320.— NOTICE BY MATERIAL-MAN TO 
TRUSTEES OF STATE INSTITUTION.— A notice 
given to Trustees of a State institution by one who had 
furnished material to a contractor with such Trustees for 
the erection of a building, that an amount is still due him 
for such material, and requiring the Trustees to pay him 
any amount then due or that shall thereafter become due 
to the contractor, operates as a garnishment and inter- 
cepts any payments which the contractor may then or 
thereafter be entitled to receive. 

Section 321.— LIEN AGAINST RAILROAD.— A lien 
may be filed against a railroad, and where a railroad lies 
in two counties, it is not necessary to file the lien in both 
counties. It is sufficient if the lien is filed in one of the 
counties only through which the railroad runs. 



198 busine:ss laws p^or business men. 

Section 322.— ABANDONMENT AND NEW CON- 
TRACT. — Where a building contract is abandoned, it is 
immaterial whether the building is subsequently completed 
by the owner or not; and a subsequent contract by the 
owner for the completion of the work is as disconnected 
with the original contract as if it were for the construc- 
tion of a different building. Where the original contractor 
under a building contract gives to the owner of the build- 
ing written notice that he abandons the contract, and that 
he declines to proceed further in its execution, and there- 
after does no work on the building, whereupon the owner 
contracts with another builder to complete the construc- 
tion of the building, it is incumbent upon those who claim 
any mechanics' liens by virtue of the original contract to 
file their claims of lien with the County Recorder within 
thirty days after there has been a cessation from labor for 
thirty days upon the unfinished contract. 

Section 323.— TIME OF FILING CLAIMS OF SUB- 
CONTRACTORS.— The right to a mechanic's lien is 
purely statutory; and if claims of liens by sub-contractors 
are not filed within thirty days after the occupation or 
use of the building by the owner or his representatives, or 
the acceptance by the owner or his agent, they are not 
filed in time, notwithstanding the original contract provides 
for certificates of the architect, as a condition precedent to 
the contractor's right to demand payment. 

Section 324.— LIENS ON MINING CLAIMS.— One 
who performs labor on a mining shaft, tunnel, level, chute, 
stope, uprise, crosscut, or incline, is entitled to a mechanic's 
lien on the mine for such services. The true meaning of 
such expressions as shafts, tunnels, levels, chutes, stopes, 
uprises, crosscut, inclines, etc., when applied to mines, sig- 
nifies instrumentalities by which such mines are opened, 
developed, prospected, improved, and worked. He who 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 199 

engages in the construction of those prime requisites upon 
or in a mine is engaged in mining, equally with one who 
extracts the gravel or ore from the mine. 

Section 325.— MINER'S LIEN MUST BE UPON THE 
WHOLE CLAIM. — A mechanic's lien cannot be claimed 
upon part of a structure, or upon a structure which is 
part of a larger structure, or upon part of an entire prop- 
erty. Therefore, it has been held by the Supreme Court 
of California that a claim of lien for materials furnished 
for the construction of a mill, tramway, boarding-house, 
or reduction works upon a mining claim should be against 
the mining claim, and not against the specific structure 
upon the mine. One contributing labor or materials to a 
structure which is an appurtenance to a mine, or which, 
when constructed, is to form part of it, must be held to 
have anticipated its future use, and cannot claim a lien 
upon the structure alone. And the procedures provided 
for acquiring liens upon structures are not, in all respects, 
applicable to those claiming liens upon mining claims. 
They cannot all date back to the commencement of the 
work. On a mine the work is always going on, may have 
commenced before the laborers were born, and may continue 
indefinitely. There is no special thirty days, therefore, 
within which mining lienors must record their notices and 
claims of lien. The labor cannot generally be said to have 
contributed to the creation of the property, or added to 
its value ; on the contrary, it may diminish its value — per- 
haps render it valueless. The Code does not seem to have 
provided for all the cases which may arise in regard to 
liens upon mining jclaims. We can only follow the pro- 
cedure so far as applicable. For that purpose, the mining 
claim must stand in the place of the "structure" as the 
property to be charged with the lien. It is the property 
which should be described in the notice and claim of lien 
under Section 1187 of the Code. One who has built a 



200 busine:ss laws for btjsine:ss MtN. 

chimney in a house, or a porch, or a door-step, has helped 
to build a structure ; but he cannot acquire a lien upon 
these specific structures, and by detached sales destroy the 
value of the claims depending upon liens upon the whole 
house. A structure may be a part of another larger struc- 
ture, and in reference to it constitute but a part of a struc- 
ture. In such cases it is well settled the lien must cover 
the entire structure. The mining lien, if it exists at all, 
extends to the whole claim. Strictly speaking, of course, 
a mining claim cannot be constructed, altered, or repaired. 
The intention of the lawmakers seems to have been to give 
a lien upon the whole claim, for labor performed on and 
for materials furnished for and used in any structure, on 
or in the mining claim. The lien given by the statute 
is upon the mining claim as a whole, and not upon the 
separate pieces of work done in its repairs. A claim of 
lien for material furnished, to be used in a building upon 
a mining claim, should be against the mining claim, and 
not against the specific structure upon the mine. 

Section 326.— NO LIEN AGAINST A PUBLIC 
BUILDING. — A mechanic's lien cannot be acquired 
against a public building. A material-man or a mechanic 
who furnishes materials to or does work for a contractor 
for the erection of a county building, upon giving written 
notice to the county of his claim, as provided by Section 
1 184 of the Code of Civil Procedure, acquires, as against 
the contractor, a prior right of payment of his claim from 
the unpaid portion of the contract price. This right, as 
against the contractor, does not depend upon the legality 
of the building contract, or upon the right to acquire a lien. 
The material-man or mechanic may maintain an action to 
subject the unpaid portion of the contract price to the 
payment of his claim, without seeking to enforce a lien 
against the building. And in such action, the material- 
man or mechanic may obtain a judgment for any deficiency 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 201 

there may be, against the person to whom the materials 
were furnished, or for whom the work was done. In such 
an action, the material-man or mechanic is not entitled 
to recover an attorney's fee, nor expenses incurred by him 
in giving notice of his claim. 

Section 327.— RIGHT OF MATERIAL-MAN TO 
GIVE NOTICE. — A material-man may give notice to the 
reputed owner of the structure of his claim for material 
furnislied at any time before money falls due under the 
contract, and no assignment made by the contractor of 
an amount to become afterwards due to him in the course 
of performance of the contract can, before the arrival of 
the time of payment, defeat the right of the material-man 
to give the notice provided for in the statute and to obtain 
the benefit of it; and the notice may be effectually given 
so long as the money is owed to the contractor himself, 
although the time when it should have been paid is passed. 

Section 328.— ELEVATOR PART OF BUILDING.— 

Where the original plans for a large building provided for 
an elevator, and the contract for the construction of the 
elevator was let when contracts for other work were let, 
the elevator was a substantial part of the building, and 
the building was not completed, so that the limitations 
for filing mechanics' liens would run, until it was finished. 
An elevator was called for by the original plans and speci- 
fications. A contract w^as let for its construction at the 
same time that other contracts were let. It was attached 
to the building, and formed an integral part of it. The 
fact that the building might have been used without it, 
and that it w^as a convenience merely, is immaterial. Con- 
ceding an elevator to be a mere convenience — still con- 
veniences are a material part of the building, when provided 
for by the plans and specifications ; and, so provided for, 
the building is not completed until the demands of the 
plane and specifications in this regard have been satisfied. 



202 BUSINESS LAWS EOR BUSINESS MEN 

Section 329.— DESCRIPTION OF MINING CLAIM.— 

The fact that a particular description by metes and bounds 
of a mining- claim in a notice of a lien is incorrect will render 
the notice invalid. Where the same persons own two min- 
ing claims in the same mining district, only one of which 
has on it improvements, and it appears that the mines are 
known by the names of the parties working them, a notice 
of lien reciting that it is for work done within a designated 
period of three months on a mining claim, with improve- 
ments, located in a particular mining district of a certain 
county, owned by the persons (naming them) who had 
the work done, does not identify the claim with the im- 
provements with sufficient certainty to create a lien. 

Section 330.— DWELLING-HOUSE— LAND SUB- 
JECT TO LIEN.— Only so much of the land around a 
dwelling-house is subject to lien as may be necessary for 
the convenient use and occupation of the house. So, where 
a house was situated on a forty-acre tract, the Supreme 
Court has said that the whole tract was not subject to the 
lien. The statute does not contemplate anything of that 
kind. It means exactly what it says — a sufficient space 
around the dwelling for its convenient use and occupation. 
It does not contemplate that sufficient land around the 
dwelling-house to support the owner while living there be 
set apart. Neither the productiveness nor non-productive- 
ness of the soil, nor the profit derived from the cultivation 
of the land, is a material element to be considered in deter- 
mining the amount of land to be set apart with the dwell- 
ing-house. The statute simply allows the dwelling-house 
and a quantity of land around it sufficient for its convenient 
use, as the subject of a lien. 

Section 331.— CONTRACTOR AND OWNER CAN- 
NOT TAKE AWAY MATERIAL-MAN'S LIEN.— The 
contractor and owner cannot deprive the material-man of 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 203 

his lien, by a clause in the contract, by which the contractor 
agrees to indemnify the owner against any liens taken by 
persons furnishing materials to be used in constructing the 
building. If the material-man sues the owner, and obtains 
judgment against him, and against the property, the 
owner may deduct the amount of the judgment from any 
sum due the contractor on the contract price. 

Section 332.— WHAT IS MEANT BY "OWNER."— 

AMien the law requires the claim of lien filed in the Re- 
corder's office to state "the name of the owner or reputed 
owner, if known," it means the name of the person who is 
the owner at the time the claim is filed. The law does not 
refer to the owner with whom the contract for the im- 
provement was made, or to the owner at any other time 
than at the date of filing the claim. The object of requir- 
ing the claim to be filed in order to perfect the lien is to 
give notice of the lien to those interested in the property 
upon which it is claimed ; and, as the owner at the time 
of filing the claim is the party to be affected by it, rather 
than one who has parted with the property subsequent to 
the making of the original contract, it is reasonable to 
suppose that the Legislature intended the name of the 
owner at the time the claim is filed, rather than that of 
any previous ovv^ner. 

Section 333.— REAL OR REPUTED OWNER- -It was 

not the intention of the Legislature that in the claim of 
lien filed for record the claimant must state the name of 
the real owner, at the risk of losing his lien if it shall turn 
out that he was in error. The provision of the law that 
the claimant shall give the "name of the owner, or reputed 
owner, if known," implies that, if he does not know the 
name of the owner, he may state this fact, and perfect his 
lien without naming an owner ; and also that, if in good 
faith he gives the name of a reputed owner, he will not 



204 BUSINESS LAWS FOR BUSINESS MKN. 

lose bis lien if it afterwards appears that some other per- 
son was the owner. 



Section 334.— ATTORNEY'S FEE NEED NOT BE 
PAID BEFORE SUIT.— If a suit is commenced to fore- 
close a mechanic's lien, it is not necessary, in order to re- 
cover attorney's fees, that the attorney should have been 
actually paid before the commencement of the suit. Nor 
need there be any express agreement for the payment of a 
fee. The law makes it the duty of the court, in giving judg- 
ment, to fix and allow a reasonable attorney's fee to each 
lien claimant whose claim is proved. If, however, it ap- 
peared that the attorney had agreed to give his services 
for nothing, or if he were employed by the plaintiff at a 
yearly salary, then the court might properly refuse to allow 
any fee in the suit. But in all cases where the claim is 
proved, the court has discretion to allow a reasonable attor- 
ney fee. 

Section 335.— DUTY OF OWNER UPON RECEIV- 
ING NOTICE OF MATERIAL-MAN'S CLAIM.— 

Whether a building contract is recorded or not, if proper 
notice is given to the owner by a material-man of materials 
furnished by him to the contractor, it is the duty of the 
owner to withhold from the contractor sufficient money to 
pay the claim, if it is then due or afterwards becomes due. 

Section 336.— PRIORITY OF MATERIAL-MAN'S 
CLAIM OVER MORTGAGE.— The lien of a material- 
man for lumber furnished for a dwelling will take prece- 
dence of a mortgage on the land executed immediately 
upon a conveyance thereof, but after the time when the 
materials were commenced to be furnished, notwithstand- 
ing the mortgage was given for the purchase price of the 
land. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 205 

Section 337.— MINING GROUND— PATENTED 
LAND. — A lien for work and labor may be taken upon min- 
ing ground owned by a patentee of the United States. The 
words ''mining claim," in the statute, include ''mining 
ground" and all "mines," whether the title is perfect or 
not. But the lien will not extend to adjacent land which 
is not mineral in its character. The words "mining claim," 
as used in the law, have no reference to the different stages 
in the acquisition of the Government title. It includes all 
mines where no patent has been issued, as in the case of 
a mining claim in its strict sense, and also where the patent 
has issued. 

Section 338.— APPOINTMENT OF PAINTER AS 
KEEPER. — The appointment by the owner of a building 
of a painter as keeper, and the fact that he lives in it while 
painting it, after the contractor has abandoned the work, 
does not constitute an "occupation" or "acceptance" of the 
building by the owner within the meaning of the law. 

Section 339.— MATERIALS MUST BE EXPRESSLY 
FURNISHED FOR STRUCTURE CHARGED WITH 
LIEN. — In order to enforce the lien of a material-man 
against a building or structure, the materials must not only 
have been used in the construction of the building, but 
they Tnust have been, by the express terms of the contract, 
furnished for the particular building on which the lien is 
claimed. 

Section 340.— ASSIGNMENT OF MECHANIC'S LIEN. 

— A mechanic's li'en can be assigned, after the claim of lien 
has been filed for record, but not before. Before the claim 
of lien has been filed for record, the right to the lien is a 
mere personal privilege, which the laborer, mechanic, or 
material-man may exercise or not, as he sees fit; hence 
it is not the subject of assignment. But after the claim 



206 BUSINESS LAWS FOR BUSINESS MEN. 

of lien has been tiled for record, it can be assigned, and 
the assignee will have all the rights of the original holder 
of the lien. 

Architects 

Section 341.— COMPENSATION OF ARCHITECT.— 

The compensation of an architect who draws plans and 
specifications is left to an agreement betAveen himself and 
his employer. But if there is no agreement as to what is 
to be paid for the architect's work, the laAv will allow him 
a reasonable compensation for his services. A\'hat is a 
reasonable compensation will depend upon the character 
of the work he has done, and will be determined by the 
knowledge and experience of persons skilled in that kind 
of work. Ciistom may also enter into the question of the 
architect's compensation, as where he has superintended 
the construction of the building, and it is the local custom 
to pay architects so much for such service : in Avhich case 
it will be presumed that his services of like character 
were worth the customary compensation, unless some fact 
is shown which makes these services Avorth more or less 
than the customary rate. 

Section 342.— ARCHITECT'S LIEN.— An architect has 
a lien on the building for his pay. He must, to enforce his 
lien, file the same claim of lien in the office of the County 
Recorder as is required of laborers, mechanics, and material- 
men, referred to in preceding Sections. 

Code of CiA'il Procedure, Section 1183. 

Section 343.— ARCHITECT CANNOT FILE LIEN 
AGAINST PUBLIC BUILDING.— If an architect pre- 
pares plans and specifications for a public building, such as 
a Court House, Tail, City Hall. Hall of Records, or School 
House, he cannot file a lien against any such property, and 
he must look only to the public funds provided by law for 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 207 

such public improvements. Justice Temple, in the Supreme 
Court of California, in the case of Mayrhofer against the 
Board of Education of San Diego, in which case it was 
decided that in California no lien will be allowed against 
a public building, stated the reason thus : ''The claim is 
made that public buildings are included both in the word 
'property,' used in the Constitution, and in the phrase 'any 
building,' used in the Code, and therefore it must neces- 
sarily follow that mechanics and material-men are, by these 
provisions, given a right to a lien upon such buildings. 
But this ignores the rule of statutory construction, that 
the State is not bound by general words in a statute, 
which would operate to trench upon its sovereign rights, 
injuriously afifect its capacity to perform its functions, or 
establish a right of action against it. The Government 
w^as created and shaped by the Constitution. It is not an 
end in itself, but a mere instrumentality for public serv- 
ices. Its powers and functions exist only for the people. 
One of its functions is to enact laws for the government 
of the inhabitants within its limits, thereby affording them 
protection and advancing their general w^elfare. The prop- 
erty it holds is simply to enable it to perform the services 
required of it. It is as much devoted to public use as are 
the streets and highways, though in a different way. In- 
stead of being the natural and obvious conclusion, that 
a general law providing remedies for private individuals 
was intended to enable a creditor of the State to seize this 
property for the satisfaction of his debt, it would be a most 
unnatural inference. The Constitution has itself provided, 
as the only means which the State has for the payment of 
its debts, the exercise of the sovereign power of taxation. 
And for each political subdivision the rule is the same. 
These revenues are divided into specific funds, and one 
furnishing labor or material to the State knows to what 
he must look for payment. He becomes a creditor of a 
specific fund, and has no rights except with reference "o 



208 busine:ss laws for businkss men. 

such fund." (Decided by the Supreme Court of CaHfornia 
in the case of Mayrhofer vs. Board of Education of San 
Diego, which decision is printed in Volume 89 of the CaH- 
fornia Reports, page no.) 

Section 344.— ARCHITECT HAS NO LIEN AGAINST 
MONUMENT IN PUBLIC PARK.— Where an architect 
is employed by a contractor for the erection of a monument 
in a public park," he has no lien for his pay upon the monu- 
ment or the land on which it is erected. This question 
was decided by our Supreme Court in the matter of the 
Garfield Monument, in Golden Gate Park, San Francisco. 
The Supreme Court said : ''The monument, though built 
by private contribution, was erected upon and as an adorn- 
ment of one of the public parks of the municipality. It 
was affixed to the freehold, and thus became a part of the 
land, the property of the municipality. The monument 
could not be made subject to a lien." (Decided by the 
Supreme Court of California in the case of Griffith vs. 
Happersberger, which decision is printed in Volume S6 
of the California Reports, page 605.) 

Section 345.— PAYMENTS MADE ON ARCHITECT'S 

CERTIFICATE.— Where the contract provides that pay- 
ments shall be made on the certificate of the architect — 
who is required by the contract, among other things, to 
certify that all the work of the mechanics, laborers, and 
others employed by the original contractor, has been paid — 
his certificate is conclusive of the rights of all parties con- 
cerned, unless it can be shown that it was obtained by the 
owner by collusion or fraud. 

Section 346.— ARCHITECT'S CERTIFICATE AS TO 
LIENS. — Where a building contract provides that for each 
of the payments a certificate shall be obtained from the 
architect, and that at the time of the presentation of any 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 209 

certificate there shall not be any liens against the building, 
and a lien is filed before the last installment, it does not 
become due while such condition exists ; and the amount 
of the lien must be deducted from the amount due the 
contractor. 

Section 347.— CONDITION AS TO CERTIFICATE 
MAY BE WAIVED BY OWNER.— The condition in a 
contract for the erection of a building, that all installments 
of payments shall be made upon certificates of the archi- 
tect that the materials and labor have been furnished in 
accordance with the plans and specifications, may be waived 
by the owner. The clause as to the production of the 
certificates is for the benefit of the owner, and he may 
waive it at his option, and accept other proofs. 

Section 348.— ARCHITECT'S PLANS PART OF CON- 
TRACT. — When the contract mentions the architect's 
drawings and specifications, and refers to them for con- 
ditions of the agreement, they form an essential part of 
the building contract, and should be annexed to the con- 
tract before filing. The plans and specifications cannot 
be left in the architect's ofiice, and at the same time be 
considered as annexed to the contract. If intended to 
cooperate with and be incorporated into the formal con- 
tract, the drawings and specifications must be in fact at- 
tached to the contract and filed for record at the same time. 

Section 349.— CONTRACT VOID FOR FAILURE TO 
RECORD SPECIFICATIONS.— Where a building con- 
tract is not filed in the Recorder's ofiice, but a memorandum 
is filed which contains within itself no sufficient statement 
of the general character of the work to be done, but refers 
to plans, drawings, and specifications remaining in the 
ofiice of the architect and which are not recorded, the con- 
tract is void, and mechanic lienors are entitled to recover 



210 BUSINESS LAWS FOR BUSINESS M^N. 

the full value of the labor done and materials furnished, 
irrespective of the contract price. 

Section 350.— SERVICES OF ARCHITECT.— The serv- 
ices of an architect, in the preparation of drawings, plans, 
and specifications for a building and in superintending its 
erection are "work and labor upon a building," within the 
meaning of the mechanic's lien law. The architect who 
superintends the construction of a building performs labor 
as truly as the carpenter who frames it, or the mason who 
lays the wall, and labor of a most important character. 
The language quoted makes no distinction between skilled 
and unskilled labor, or between mere manual labor and 
the labor of one who supervises, directs, and applies the 
labor of others. The general principle upon which the 
lien laws proceed is, that any person who has contributed 
by his labor or by furnishing materials, to a structure 
erected by an owner upon his premises, shall have a claim 
upon the property for his compensation. An architect who 
prepares the drawings, plans, and specifications for a build- 
ing, and superintends its erection, may as truly be said to 
perform labor on it as any one who takes part in the work 
of construction. 

Section 351.— LIABILITY OF ARCHITECT FOR 
NEGLIGENCE. — An architect must perform his services 
with diligence and ordinary care. If by his negligence 
long delay occurs in finishing drawings, plans, and speci- 
fications which he has agreed to furnish, and the other 
party is damaged by the delay, he is liable for the loss. 
Or if, as superintendent he neglects his duty, to the detri- 
ment of his employer, he is also liable to him in damages. 
The architect is bound to devote to his employer the skill 
and energy he possesses, and will be liable in damages for 
any failure in this respect. 



busine:ss contracts and le:gal obligations. 211 

Section 352.— CONTRACT FOR PERCENTAGE ON 
COST OF BUILDING. — Under a contract with an archi- 
tect to furnish the necessary drawings, specifications, and 
details for the construction of a building, for a certain per- 
centage of the total cost of the construction of the building, 
the architect, after furnishing the drawings, etc., in case 
his employment is terminated before the completion of the 
building, is entitled to the agreed commission on the total 
cost of the building. This was determined by our Su- 
preme Court, in a case where Charles I. Havens sued Annie 
Donahue, at San Francisco, for a commission of two and a 
half per cent upon the total cost of the building, according 
to his contract with Mrs. Donahue. He was paid a portion 
of the commission, but his employment was terminated 
before the building was completed, and he sued to recover 
the balance. Mrs. Donahue contended that Havens was 
only entitled to recover his commission upon the cost of 
construction so far as the building had proceeded at the 
time his employment was terminated. The Supreme Court 
decided that the architect in question had nothing to do 
with the construction of the building. His contract was 
simply to furnish the plans, drawings, and specifications, 
and this he did. (Decided by the Supreme Court of Cali- 
fornia in the case of Havens vs. Donahue, which decision 
is printed in Volume 11 1 of the California Reports, page 
297.) 

Section 353.— LIABILITY FOR DISCLOSING IN- 
TENTION OF OWNER.— An architect employed to fur- 
nish plans for the. erection of a building on a site on which 
there is another building, occupied by tenants, is not liable 
to the OAvner, by telling people of the intended erection of 
the new building — the architect having neither contracted 
nor been requested to keep such a fact secret — for the loss 
of rent caused by the vacation of the building by the tenants. 



212 BUSINESS LAWS FOR BUSINESS MEN. 

Section 354.— TIME SPENT ON PLANS AND SPECI- 
FICATIONS. — Where an architect is compelled to sue for 
his compensation, and there is no agreement fixing the 
amount of his pay, he may prove the reasonable value of 
his services. And evidence as to the length of time spent 
by an architect on certain plans and specifications is ad- 
missible on the question of the value of his services in 
preparing them, the jury not being limited to a considera- 
tion of the expert testimony on that question. 

Liens for Salary and Wages 

Section 355.— PREFERRED CLAIMS FOR SALARY 
AND WAGES. — The law of California provides for cer- 
tain liens for salary and wages, which do not come in the 
class of mechanic's liens, because including other persons 
in other occupations. In all assignments for the benefit 
of creditors, or in proceedings for insolvency, the wages 
and salaries of miners, mechanics, salesmen, servants, clerks, 
or laborers, are preferred claims. It must appear that the 
services were rendered or work done within the previous 
sixty days. These claims Vv^ill be preferred to the amount 
of one hundred dollars each, and must be paid before any 
other creditors of the person who makes the assignment. 
Code of Civil Procedure, Section 1204. 

Section 356.— PREFERRED CLAIMS FOR WAGES 
AND SALARIES AGAINST ESTATES.— In case of the 
death of any employer, the wages of each miner, mechanic, 
salesman, clerk, servant, or laborer, who has rendered 
services or performed work within the sixty days next pre- 
ceding the death of the employer, not exceeding one hun- 
dred dollars in amount, are preferred claims against the 
estate, and must be paid by the executor or administrator 
of the estate before any other claims, except the funeral 
expenses, expenses of the last sickness, expenses of adminis- 
tration, and family allowance. 

Code of Civil Procedure, Section 1205. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 213 

Section 357.— WAGES AND SALARIES IN CASE OF 
ATTACHMENT AND EXECUTION.— In cases of at- 
tachments and executions (not issued in suits for wages) 
served on the employer of any miners, mechanics, sales- 
men, servants, clerks, or laborers, the latter may give notice 
to the creditor and the officer levying the attachment or 
execution of their claims for wages or salaries ; the notice 
may be given at any time before the actual sale of the 
property levied on, or, in the event of a levy upon money, 
at any time before the transfer of such money under ex- 
ecution. After the notice is given, unless the claim is 
disputed by the debtor or a creditor, the officer must pay 
to the person claiming wages or salary the amount he is 
entitled to receive for services rendered within the sixty 
days next preceding the levy of the attachment or execu- 
tion, not exceeding one hundred dollars. The officer must 
make this payment out of the proceeds of sales of prop- 
erty, or out of money coming into his hands by the levy. 
The claim for wages or salary referred to must be sworn to 
by the person making the claim. If the claim as made is 
disputed, by the debtor or a creditor, the person presenting 
the claim must commence a suit on it within ten days ; the 
officer in the meantime holding enough money to pay the 
claim until the determination of the suit. 

Code of Civil Procedure, Section 1206. 



Vendor's Lien 

Section 358.— LIEN OF SELLER OF REAL PROP- 
ERTY. — One who sells real property has a vendor's lien, 
independent of possession, for so much of the price as 
remains unpaid and unsecured. The vendor may have the 
personal obligation of the buyer, but this is not a security 
which will defeat his vendor's lien. 
Civil Code, Section 3046. 



214 BUSINESS LAWS FOR BUSINESS MEN. 

Section 359.— WHEN TRANSFER OF CONTRACT 
WAIVES VENDOR'S LIEN.— The seller of real estate 
may waive his vendor's lien for the purchase price. And 
where the buyer has given to the seller a written contract 
for payment of all or part of the price, and the seller assigns 
and transfers the contract to a third person, this will be 
considered a waiver of his vendor's lien to the extent of 
the sum payable under the contract. But a transfer of 
the contract, in trust to pay debts, and the surplus to belong 
to the seller, is not a waiver of the lien. 
Civil Code, Section 3047. 

Section 360.— EXTENT OF VENDOR'S LIEN.— A 

vendor's lien is valid against every one claiming under the 
debtor, except a purchaser or encumbrancer in good faith 
and for value. If the buyer transfers the property to one 
who has no notice of the lien of the vendor, no notice or 
knowledge that any part of the price remains unpaid, and 
who pays a valuable consideration for the property, and acts 
throughout the transaction in good faith, the vendor will 
lose his lien. So, as to a mortgagee, where the vendee has 
given a mortgage on the property to one who has no notice 
of the real facts, and takes the mortgage in good faith and 
for value, the vendor cannot assert his lien against the 
mortgagee. 

Civil Code, Section 3048. 

Section 361.— LIEN OF SELLER OF PERSONAL 
PROPERTY. — One who sells personal property has a spe- 
cial lien, dependent on possession, for its price, if the prop- 
erty is in his possession when the price becomes payable. 
The lien may be enforced in the same manner as when 
property is pledged. That is to say, he may store the 
property, and sue the vendee for the price ; or he may resell 
the property, to the best advantage, and recover from the 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 215 

vendee the difference between the contract price and the 
price obtained on the resale. 

Civil Code, Section 3049. 

Liens on Personal Property 

Section 362.— LIEN FOR SERVICES.— Every person 
who renders any service to the owner of personal property, 
in labor or skill, employed for the protection, improvement, 
safe-keeping, or transportation of the property, has a lien 
upon it, dependent on possession, for the compensation due 
to him from the owner for such services. 
Statutes of 1901, page 270. 

Section 363.— LIEN OF LIVERY STABLE PROPRI- 
ETORS. — Livery or boarding or feed stable proprietors 
have a lien, dependent on possession, for their compensa- 
tion for caring for, boarding, and feeding horses and stock. 
In order for the lien to attach, however, it is necessary that 
the animal be placed with the livery stable proprietor by 
its owner, or by some one having authority from him. 
Therefore, if a thief places a stolen horse in a livery stable, 
or if the horse is placed there by anybody not having au- 
thority from the owner, the keeper of the stable has no 
lien on the horse. A lien can generally be created only 
by the owner of property, or by his agent. Hence, one 
having possession of a horse under an agreement to pur- 
chase, by which agreement the seller retains the title until 
payment is made, cannot, as against the seller, create a 
lien for its board and care. But where the owner or his 
agent leaves a horse, buggy, and harness in a livery stable, 
the livery stable keeper has a lien on all the property — the 
horse, buggy, and harness — on account of his feed and care 
of the property. He should give notice to the owner of 
the amount of his charges, and that if not paid he will sell 
the property. If, after giving the notice, the charges are 
not paid, the livery stable keeper can sell the property and 



216 BUSINESS LAWS FOR BUSINE:SS MEN. 

retain enough to pay his charges and the costs of sale. 
If any amount remains, after paying his charges and the 
costs of sale, the owner of the property is entitled to the 
balance. The law does not specify any particular form 
of notice to the owner, nor any particular time of notice ; 
the notice given should be reasonable in time, so as to give 
the owner a fair opportunity to come and pay the charges 
and release his property from the lien. 
Statutes of 1901, page 270. 

Section 363a.— DEFRAUDING LIVERY STABLE 
KEEPERS. — There is a law, making it a misdemeanor 
to defraud a livery stable keeper, the punishment for 
which may be a $500 fine, or imprisonment in the County 
Jail for six months. Any person who obtains any livery 
hire or feed, without paying for it, with intent to defraud ; 
or who obtains credit by the use of any false pretense ; 
or who abuses a horse, or keeps it longer or drives it 
further than agreed upon ; or who allows a feed bill to 
accumulate against his property, is guilty of a misdemeanor. 
But in all such cases the intent to defraud must be proved 
as a fact. 

Statutes of 1903, page 157. 

Section 364.— LIEN FOR PASTURING HORSES OR 
STOCK. — A farmer or ranchman has a lien for pasturing 
horses or stock, dependent on possession, for the amount 
of his compensation. If the pasturage is not paid when 
due, notice should be given to the owner of the stock that 
the pasturage charges, stating the amount, must be paid 
at a certain time, or the stock will be sold. The notice 
must be for a reasonable time, according to circumstances, 
and if the pasturage charges are not then paid, the stock 
can be sold to pay the bill. 

Statutes of 1901, page 270. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 217 

Section 365.— LIEN OF LAUNDRY PROPRIETORS. 

— Laundry proprietors and persons conducting a laundry 
business have a general lien, dependent on possession, upon 
all personal property in their hands belonging to a cus- 
tomer, for the balance due them for laundry work. 
Statutes of 1901, page 270. 

Section 366.— LIEN FOR REPAIRING PERSONAL 
PROPERTY. — A person who makes, alters, or repairs any 
article of personal property, at the request of the owner 
or legal possessor of the property, has a lien on the prop- 
erty for his reasonable charges for work done and materials 
furnished; and he may keep possession of the property 
until his charges are paid. If the charges are not paid 
within two months after the work is done, the property may 
be sold at public auction, by giving ten days' public notice 
of the sale in some newspaper published in the county in 
which the work was done. If there is no newspaper pub- 
lished in the county, the notice must be posted up in three 
of the most public places in the town where the work was 
done, for ten days previous to the sale. The proceeds of 
the sale must be applied to the payment of the lien and 
expenses of selling the property, and if there is any balance 
left, it must be paid over to the owner of the property. 
Civil Code, Section 3052. 

Section 367.— OFFICER'S LIEN.— An officer who levies 
an attachment or execution upon personal property ac- 
quires a special lien, dependent on possession, upon such 
property, which authorizes him to hold it until the writ 
is discharged or satisfied, or until a judicial sale of the 
property is had. 

. Civil Code, Section 3057. 

Logger^s Lien 

Section 368.— LIEN FOR LABOR ON LOGS AND 
LUMBER. — All persons who labor at cutting, hauling, 



218 BUSINESS LAWS FOR BUSINESS MEN. 

rafting, or drawing logs, or lumber, or who perform any 
labor in or about a logging-camp necessary for the getting 
out or transportation of logs or lumber, have a lien on 
the property for the amount due for their personal services. 
This lien takes precedence of all other claims, and con- 
tinues for thirty days after the logs or lumber arrive at 
the place of destination, for sale or manufacture. If logs 
are rafted down a river, to a sawmill for manufacture ; or 
if logs are hauled on a railroad, to the mill; in either case 
the lien of the logger continues for thirty days after the 
logs reach the mill. 

Section 369.— CLAIM OF LIEN TO BE FILED FOR 
RECORD. — Within twenty days after the completion of 
his work, if a logger or laborer in the woods or camps 
desires to take advantage of the lien law, he must file for 
record in the office of the Recorder of the county a claim, 
sworn to by him, containing a statement of his demand, 
after deducting all just credits and offsets; the time within 
which the labor was done ; the name of the person or per- 
sons for whom he worked; the place where the logs or 
timber upon which the lien is claimed are believed to be 
situated, and how they are marked ; the name of the reputed 
owner ; and the name of the reputed owner of the land from 
which the logs were cut and hauled. 

Section 370.— WHEN SUIT MUST BE COMMENCED 
TO FORECLOSE LIEN.— After the claim of lien has 
been filed, a suit to foreclose the lien must be commenced 
within twenty-five days ; and if this is not done, the lien 
will be at an end. 

Section 371.— ATTACHMENT AS FURTHER SE- 
CURITY. — The law provides, that when the suit to fore- 
close the lien has been commenced, the logger may have 
the logs or timber attached as further security for the 
payment of any judgment he may recover in the suit. The 



BUSINESS CONTRACTS AND LI:GAL OBLIGATIONS. 219 

writ of attachment is issued by the Clerk when he issues 
the summons, or it may be issued at any time afterwards, 
upon receiving an affidavit from the plaintiff showing the 
defendant's indebtedness to him, and that the attachment 
is asked for in good faith. The Sheriff will levy the at- 
tachment by taking the logs or timber into his possession, 
and will be bound to keep possession of the property unless 
the defendant gives him security to pay the judgment, if 
any is obtained against him in the suit. If the defendant 
gives the security, the Sheriff will release the property, 
free from the lien ; for if the logger obtains good security 
that his claim Avill be paid, if he gets a judgment, this is all 
he needs, and the lien will no longer be necessary. 

Section 372.— UNDERTAKING ON ATTACHMENT. 

— Before the attachment will issue, a bond will have to be 
filed with the Clerk, in a sum not less than two hundred 
dollars, for costs and damages if the defendant wins the suit. 

Section 373.— EXTENT OF THE LIEN.— The logger's 
lien in no case extends beyond the limits of the county in 
which the logs or timber in controversy were cut. 

Section 374.— ATTACHMENT NOT NECESSARY TO 
HOLD LIEN. — The attachment of the logs and timber is 
not necessary to hold the lien. It is at the option of the 
logger w^hether any attachment at all shall be issued, and 
it is only provided as additional security, and for the pur- 
pose of compelling the defendant to give a bond for the 
amount of the claim. The logger may file his claim of 
lien, and then proceed and foreclose it, without getting 
out any attachment at all. 

Statutes of 1877, page 747; Statutes of 1880, page 
38; Statutes of 1887, page 53. 



220 busine:ss laws for busine:ss me:n. 

Lien of Persons Working on Threshing-Machines 

Section 375.— PERSONS ENTITLED TO THE LIEN. 

— Every person performing work or labor with or about 
any threshing-machine or engine, horse-power, wagon, or 
other of the appHances, while engaged in threshing, has a 
lien on the property to the extent of the value of his 
services. 



Section 376.— EXTENT OF LIEN.— This lien extends 
for ten days after the claimant has ceased such work or 
labor. 

Section 377.— SUIT MUST BE COMMENCED 
WITHIN TEN DAYS.— The lien expires unless a suit 
to recover the amount of the claim is commenced within 
ten days after the party ceases work. 

Section 378.— PROCEEDS OF SALE DISTRIBUTED 
PRO RATA. — In any suit to enforce a lien on a threshing- 
machine outfit, when a judgment is obtained in favor of 
the plaintiff, and the property is sold, the proceeds of the 
sale are required by the law to be distributed pro rata to 
all judgment creditors who have, within ten days, begun 
suits to recover judgments for the amount due them for 
such work. The meaning of this is, that where there are 
a number of laborers who have filed their suits, they shall 
all share alike in the final disposition of the property. If 
the property will sell for enough to pay all in full, they 
will each receive full pay ; but if the proceeds of the sale 
are not sufficient to pay all in full, then each must lose 
in proportion to the amount of hi-s claim. 

Section 379.— NO NOTICE REQUIRED.— To enforce a 
lien upon a threshing-machine, no notice is required to be 
recorded, or given to anybody. The law creates the lien, 
without any formality, and the only thing required of the 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 221 

laborer is, that he shall commence suit within ten days 
after he quits work. 

Section 380.— LIEN IS ASSIGNABLE.— The lien of 
laborers on or with a threshing-machine is assignable. All 
may assign to one person, before suit is brought, and the 
assignee may bring suit upon all the claims at the same 
time. 

Statutes of 1885, page 109. 

Liens in Favor of Owners of StallionSt Jacks, 
and Bulls 

Section 381.— PERSONS ENTITLED TO THE LIEN. 

— There had been so many complaints by owmers of stal- 
lions, jacks, and bulls, kept for breeding purposes, of in- 
ability to collect their charges for services rendered, that 
the Legislature was induced to pass a law giving them a 
lien upon the animals served. This law provides that any 
owner or person having in charge a stallion, jack, or bull, 
used for propagating purposes, shall have a lien for the 
agreed price for the service of such stallion, jack, or bull, 
upon any mare or cow served for pay and upon their off- 
spring. 

Section 382.— CLAIM TO BE FILED.— A claim must 
be filed in the office of the County Recorder, in the county 
where the mare or cow is served or kept, which must con- 
tain a particular description of the mare or cow served ; 
the date and place of serving; the name of the owner or 
reputed owner of the mare or cow served ; a proper descrip- 
tion, by name or otherwise, of the stallion, or jack, or bull, 
performing the service, and the name of the owner or per- 
son in charge of it; and the amount of the lien claimed. 

Section 383.— NOTICE TO SUBSEQUENT PUR- 
CHASERS. — The claim of lien, when filed, operates as 



222 BUSINieSS LAWS I^OR BUSINESS MEN. 

notice to subsequent purchasers and encumbrancers of the 
mare or cow for the term of one year from the date of the 
fiHng of the claim. 

Section 384.--FALSE REPRESENTATIONS INVAL- 
IDATE LIEN. — Any wilfully false representations con- 
cerning the breeding or pedigree of the stallion, jack, or 
bull, made or published by the owner or person in charge 
of it, will invalidate the lien. 

Section 385.— SUITS TO FORECLOSE.— Suits to fore- 
close these liens may be brought in any county where the 
mare or cow, or the offspring from such service, may be 
found. 

Section 386.— ATTACHMENT AS SECURITY.— Plain- 
tiff may have an attachment put on the mare or cow, or 
their offspring, at the time of issuing the summons, or 
at any time afterwards before judgment, as further secur- 
ity for his pay; an undertaking on attachment is required 
to be given, before the attachment will issue ; and the 
Sheriff' must then take into his possession the mare or cow% 
or offspring, and keep them pending the suit, unless the 
owner or person in charge of the animals gives him a bond 
to pay the judgment, if one should be obtained. 
Statutes of 1891, page 90. 

Damages for Breach of Contract 

Section 387.— MEASURE OF DAMAGES.— The meas- 
ure of damages allowed by the law of this State, for the 
breach of an obligation arising from contract, is the amount 
which will compensate the injured party for all the detri- 
ment proximately caused by the breach, or which in the 
ordinary course of things would be likely to result. 
Civil Code, Section 3300. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 22B 

Section 388.— BREACH OF CONTRACT TO PAY 

MONEY. — The detriment caused by the breach of an ob- 
hgation to pay money only is the amount due by the terms 
of the obhgation, with interest. The holder of a note 
may be greatly damaged by the failure of the other party 
to pay it; for he may have to borrow money himself at 
high rates of interest ; or he may be unable to borrow, and 
thus incur ruinous loss which might have been avoided if 
his debtor had paid him. Yet the law considers that to 
allow any damages, further than the amount due on the 
contract, would be to fix a measure of damages too un- 
certain and unreliable to meet the requirements of daily 
business and commercial life ; and, therefore, the law has 
placed the measure of damages for breach of a contract 
for the payment of money only at the amount due by the 
terms of the obligation, with interest. 
Civil Code, Section 3302. 

Section 389.— BREACH OF WARRANTY OF TITLE. 

— When one sells property and warrants the title, and the 
title proves bad, the law allows the grantee the price paid 
to the grantor, if the title to the whole property is bad ; or, 
if there proves to be no title to a part only of the prop- 
erty, such proportion of the price as that portion bears to 
the whole property; and, also, interest at seven per cent 
on the price paid for the time during which the grantee 
derived no benefit from the property, not exceeding five 
years. 

Civil Code, Section 3304. 

Section 390.— DAMAGES IN CASE OF EXCHANGE 
OF LANDS. — When lands are exchanged, and the title 
to one of the tracts fails, which in the exchange between 
the parties was conveyed with general warranty, a recovery 
may be had against the grantor of that tract for the value 
of the land, with interest and costs. 



224 BUSINESS LAWS FOR BUSINESS MEN. 

Section 391.— BREACH OF AGREEMENT TO CON- 
VEY REAL PROPERTY.— The damages caused by the 
breach of an agreement to convey an estate in real prop- 
erty is the price paid, and the expenses properly incurred 
in examining the title and preparing the necessary papers, 
with interest. 

Civil Code, Section 3306. 

Section 392.— BREACH OF AGREEMENT TO BUY 
REAL PROPERTY.— The damages caused by the breach 
of an agreement to buy an estate in real property is deemed 
to be the excess, if any, of the amount which would have 
been due to the seller under the contract over the value 
of the property to him. 

Civil Code, Section 3307. 

Section 393.— BREACH OF WARRANTY OF TITLE 
TO PERSONAL PROPERTY.— Where the title to per- 
sonal property is warranted, and there proves to be no 
title, the damage is the value of the property to the buyer, 
when he is deprived of its possession, together with any 
costs which he has become liable to pay in a suit brought 
by the true owner to recover the property. 
Civil Code, Section 3312. 

Section 394.— DAMAGES FOR BREACH OF WAR- 
RANTY OF QUALITY OF PERSONAL PROPERTY. 

— Where personal property sold is warranted to be of a 
certain quality, and turns out not to be of that quality at 
all, the buyer is entitled to damages for the difference in 
value between what he bargained for and that which was 
actually delivered to him. 

Section 395.— BREACH OF WARRANTY FOR SPE- 
CIAL PURPOSE. — If personal property is sold for a spe- 
cial purpose, as a machine designed to do certain work, and 
is warranted fit for that purpose, and turns out to be unfit, 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 225 

the buyer is entitled to damages ; and his damages will be 
the difference between the value of the thing as it is and 
its value as it would have been had it been as warranted. 
And if the buyer, before he discovers that the property 
is unfit for the purpose for which it was warranted, makes 
an effort in good faith to use it for such purpose, he will 
also be entitled to damages for his loss in trying to make 
use of it. 

Civil Code, Section 3314. 

Section 396.— DAMAGES FOR BREACH OF CAR- 
RIER'S OBLIGATIONS.— A carrier of freight, passen- 
gers, or messages, is bound to accept them when tendered 
to it. If it refuses, the person requiring the service, and 
who is thus compelled to look elsewhere to have it per- 
formed, is entitled to damages, being the difference between 
the rate wdiich the first carrier had a right to charge and 
the rate which he was afterward compelled to pay. If a 
carrier of freight fails to deliver it, the law makes the car- 
rier liable in damages, and fixes the measure of the dam- 
age at the value of the property at the place and on the 
day at which it should have been delivered, deducting 
whatever the freight charges would have been. So, if 
freight is lost on the way, the carrier will be liable to pay 
such damages. The carrier and the consignor may, how- 
ever, make a valid contract limiting the liability of the 
carrier. While the ordinary measure of damages for 
breach of a carrier's obligation to deliver freight is the 
value of the goods at the time and place of delivery, the 
liability of the carrier may be limited by a special contract 
signed by the consignor, making the invoice price at the 
point of shipment the measure of damages, or otherwise 
limiting the carrier's liability. A carrier of freight is also 
liable to pay damages for delay in delivering the freight. 

15 



226 BUSINi:SS LAWS FOR BUSINi:SS MEN. 

The damages allowed will be the depreciation in the in- 
trinsic value of the freight during the delay, and also the 
depreciation in the market value of the goods. 
Civil Code, Sections 3315, 3316, 3317. 

Section 397.— DAMAGES FOR BREACH OF OTHER 
CONTRACTS.— The damages allowed for the breach of 
any contract must be the proximate result of the breach. 
The damages must not be speculative and uncertain, and 
they must be capable of being traced to the act complained 
of. For the breach of any contract, the injured party is 
entitled to enough damages to make him whole again, pro- 
vided the damages claimed are the proximate or natural 
results of the breach. The damages allowed must be such 
as are proximately caused by the breach, or such as in the 
ordinary course of things would be likely to result from it. 

Partnership 

Section 398.— WHAT CONSTITUTES A PARTNER- 
SHIP. — The Civil Code of California defines a partner- 
ship as being ''the association of two or more persons for 
the purpose of carrying on business together, and divid- 
ing its profits between them." This definition of a part- 
nership is not as comprehensive as many that have been 
adopted by eminent writers on legal subjects. Judge Story 
defines a partnership thus : "Partnership, often called co- 
partnership^ is usually defined to be a voluntary contract 
between two or more competent persons to place their 
money, effects, labor, and skill, or some or all of them, in 
lawful commerce or business, with the understanding that 
there shall be a communion of the profits between them." 
But whether we consider the definition of Judge Story, or 
the definition to be found in the Civil Code of California, 
first quoted, it is very evident that in all one essential thing 
is omitted. They state that there is to be a division of the 
profits, but say nothing about sharing the losses. A better 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 227 

definition of partnership, and one more in accord with the 
estabhshcd conditions of modern business, might be sug- 
gested thus : Partnership is the voluntary association of 
two or more persons for the purpose of carrying on business 
together, and dividing its profits and sharing its losses be- 
tween them. For there may be, and often is, a sharing of 
the profits of a business venture, when there is no partner- 
ship. Agents, or brokers, or commission merchants may 
be oft'ered and accept a share of the profits, as an induce- 
ment to greater effort on their part, but this will not con- 
stitute them partners with their principals. There must be 
a community of interest in both the profits and the losses, 
to constitute a valid partnership. 

Section 399.— FORMATION OF PARTNERSHIP.— 

A partnership can be formed only by the consent of all 
the parties. As the voluntary consent of all the members 
is necessary in the formation of a partnership, it is the 
law that no ncAv partner can be admitted into a partnership 
without the consent of every member. If one partner sells 
his interest in the partnership property, this will not make 
the purchaser a partner, without the consent of the partner 
who stays in the business. Neither member of a partner- 
ship can force a new member into the firm. 

Section 400.— PARTNERSHIP PROPERTY.— The 

property of a partnership consists of all that is contributed 
to the common stock at the formation of the partnership, 
and all that is subsequently acquired by the partnership. 
But while every partnership presupposes that there must 
be sofnething brought into the common stock or fund by 
each member, it is not necessary that each should con- 
tribute or contract to contribute money, goods, effects, or 
other property, towards the common stock; for one may 
contribute labor, or skill, and another may contribute 
property, and another may contribute money, according 



228 BUSINESS LAWS FOR BUSINESS MEN. 

as they shall agree. Sometimes it happens that each part- 
ner contributes only skill, or labor, or services, for the com- 
mon benefit. But all must contribute something, and thus 
join together either money, or goods, or other property, 
or labor, or skill. Whether the partners in the first place 
contribute money, or real or personal property, or only 
their personal labor and services, if they afterwards acquire 
any property in the partnership business and with part- 
nership funds, it belongs to the firm, and not to the mem- 
bers individually. 

Civil Code, Section 2401. 

Section 401.— PARTNER'S INTEREST IN PART- 
NERSHIP PROPERTY.— The interest of each member 
of a partnership extends to every portion of its property. 
One partner has no interest distinct from the other in the 
assets of the firm. One partner has no control of the part- 
nership assets which the other cannot have. The property 
of the partnership is common, held by a community of 
interest; and it is always first liable for the partnership 
debts, before any of it can be applied to the individual use 
or individual debts of either partner. 

Section 402.— POSSESSION OF PARTNERSHIP 
PROPERTY. — Partners are equally entitled to possession 
of the partnership property. Partners are joint owners 
and possessors of all the capital stock, funds, and effects 
belonging to the partnership, as well as of those which be- 
longed to it at the time of its first formation and establish- 
ment; so that, whether its stock, funds, or effects be the 
product of their labors or manufactures, or be received or 
acquired by sale, barter, or otherwise, in the course of their 
trade or business, there is an entire community of right and 
interest between them. 

Neither partner has any right of possession of the part- 
nership property to the exclusion of the other. One part- 
ner is as much entitled to the possession as the other. Nor 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 229 

would it make any difference if the partnership was dis- 
solved ; for in that case both partners would be entitled 
equally to the possession of the partnership assets, until 
the partnership affairs could be finally settled up. 

Section 403.— PARTNER'S SHARE IN PROFITS 
AND LOSSES. — In the absence of any agreement on the 
subject, the shares of partners in the profit or loss of the 
business are equal, and the share of each in the partnership 
property is the value of his original contribution, increased 
or diminished by his share of profit or loss. Where there 
is no agreement between the partners, they are to contribute 
equally to every loss, whether the loss be unpaid advances, 
or the loss of the original capital brought in ; and this is 
the rule, whether the partners contributed to the capita] 
in equal shares or not. It is essential to the interest of 
a valid partnership that there should be a sharing of profits 
and a sharing of losses. Profits and losses will be shared 
equally, if there is no agreement to the contrary, no mat- 
ter what proportion of the firm assets was originally con- 
tributed by each. But the partners may agree between 
themselves that one shall have a larger share of the profits 
than the other, or that one, if losses occur, shall bear a 
larger share of the loss than the other, and this agreement 
will be valid and binding. An agreement to divide the 
profits of a business implies an agreement for a correspond- 
ing division of its losses, unless it is otherwise expressly 
stipulated. But the law recognizes the fact that the in- 
equality of skill, of labor, or of experience, which the 
partners may bring into the particular business, may not 
only justify but positively require an inequality of compen- 
sation, and of exemption from loss, as a matter of justice 
and equity between the parties. And the law has, there- 
fore, wisely not prohibited it; but has left it to the parties 
to exercise their own discretion in these matters, taking 
care that no fraud, imposition, or undue advantage is taken 
by one of the other. And wherever stipulations are fairly 



230 BUSINESS LAWS I^OR BUSINESS MEN. 

made between partners, for unequal sharing of profits and 
losses, the law will uphold and enforce them as valid agree- 
ments. 

Civil Code, Sections 2403, 2404. 

Section 404.— APPLICATION OF PARTNERSHIP 
PROPERTY TO PAYMENT OF DEBTS.— Each mem- 
ber of a partnership may require its property to be applied 
to the discharge of its debts, and has a lien upon the shares 
of the other partners for this purpose, and for the payment 
of the general balance, if any, due to him. The debts of a 
partnership must be paid out of the partnership property, 
before any portion of it can be applied to the individual 
debts of the partners. The interest of a partner may be 
levied upon for the payment of his debts, but when this is 
done, the creditors of the firm must be first satisfied, be- 
fore the property can be taken to pay anybody else. 

Section 405.— WHAT IS PARTNERSHIP PROPERTY. 

— All property, whether real or personal, acquired with 
partnership funds, is presumed to be partnership property. 
There is little difficulty in determining the partnership 
character of personal or movable property, as a stock of 
goods, for instance ; but there is sometimes difficulty in 
determining the true character of real estate. The deed 
to real estate must necessarily be made to and be recorded 
in the individual names of one or more members of the 
firm. Cases often occur where the partner in whose name 
real property stands of record denies that it is partnership 
property and claims it as his own. Whenever this occurs, 
it is important to know the law governing the matter. It 
is the general rule in law that real or immovable property 
is deemed to belong to the persons in whose name the 
deed stands. But, as to partners, however the recorded 
title may stand, or in whose name it may be, real estate 
bought with partnership funds for partnership purposes 
will always be considered partnership property. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 281 

Section 406.— MUTUAL OBLIGATIONS OF PART- 
NERS. — The relations of partners are necessarily confi- 
dential, and they are always bound to deal in good faith 
one with another. In all proceedings connected with the 
formation, conduct, dissolution, and liquidation of a part- 
nership, every partner is bound to act in the highest good 
faith toward his copartners. He must not obtain any ad- 
vantage over them in the partnership affairs, by the slight- 
est misrepresentation, concealment, threat, or pressure of 
any kind. The contract of partnership has its foundation 
in the mutual respect, confidence, and belief in the entire 
integrity of each partner, and his sincere devotion to the 
business and true interests of the partnership ; and good 
faith, reasonable skill and diligence, and the exercise of 
sound judgment and discretion, are necessarily and naturally 
expected of each party to the partnership. Judge Story 
in his book on partnership says, on this subject : ''Good 
faith not only requires that every partner should not make 
any false representations to his partners, but also that he 
should abstain from all concealments, which may be in- 
jurious to the partnership business. If, therefore, any 
partner is guilty of any such concealment, and derives a 
private benefit therefrom, he will be compelled to account 
therefor to the partnership. Upon the like ground, where 
one partner, who exclusively superintended the accounts 
of the concern, had agreed to purchase the share of his 
copartners in the business for a sum, which he knew, from 
the accounts in his possession, but which he concealed from 
them, to be for an inadequate consideration, the bargain 
was set aside in equity, as a constructive fraud ; for he 
could not in fairn-ess deal with the other partners for their 
share of the profits of the concern without putting them 
in possession of all the information, which he himself had, 
with respect to the state of the accounts and the value of 
the concern." As illustrations of the good faith which 
must be observed by one partner to another, so clearly 



232 BUSINESS LAWS FOR BUSINESS M^N. 

explained by Judge Stoiy, it is a violation of good faith 
for any partner, in conducting the partnership business, to 
contract secretly with third persons for any private and 
selfish advantage and benefit to himself, exclusive of the 
partnership ; for all the partnership property and partner- 
ship contracts should be managed for the equal benefit of 
all the partners. If, therefore, any one partner should con- 
tract secretly in a matter of partnership concern for any 
private advantage or benefit to himself, to the disadvantage 
or in fraud of his partners, he will be compelled to divide 
his gains with them. So, if a purchase is made on the part- 
nership account by one partner, who secretly stipulates for 
and receives any reward or allowance from the seller, for 
his own private profit, he will be compelled to share with 
his partners. So, where one partner secretly obtains the 
renewal of a partnership lease in his own name, he will 
be held a trustee for the firm in the renewed lease. The 
obligations of partners, however, whatever they may be, 
do not prevent either member of the firm from engaging 
in other business on his own account, but it must not be 
such business as interferes with or is in any way injurious 
to the partnership. 

Civil Code, Section 241 1. 

Section 407.— LIABILITY OF PARTNERS TO AC- 
COUNT. — Each member of a partnership must account 
to it, for everything that he receives on account of the 
firm. While he must render an account of everything he 
receives, he is at the same time entitled to reimbursement 
from the firm for everything that he has properly expended 
for its benefit, and he is entitled to be reimbursed for all 
losses and risks which he has necessarily incurred on behalf 
of the firm. 

Civil Code, Section 2412. 

Section 408.— COMPENSATION FOR SERVICES TO 
FIRM. — A partner is not entitled to any compensation for 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 2o/) 

services rendered by him to the partnership. A special 
agreement may be made among the partners that one shall 
be paid an extra compensation above his share of the 
profits, for his services, but the obligation rests entirely 
upon the agreement of the parties. Where there is no 
agreement of the kind, the law will not allow one partner 
to take from the partnership assets any compensation for 
his services. The reason is, that each partner is under obli- 
gations to devote his skill and efforts to the promotion of 
the common benefit of the firm. 

Civil Code, Section 2413. 

Section 409.— RENUNCIATION OF PARTNERSHIP. 

— The law of California provides, that a partner may ex- 
onerate himself from all future liability to a third person, 
on account of the partnership, by renouncing, in good faith, 
all participation in its future profits. To do so, he must 
give notice to third persons, and to his partner, that he 
renounces all participation in the future profits of the firm, 
and that, so far as may be in his power, he dissolves the 
partnership, and does not intend to be liable on its account 
for the future. After a partner has given notice of his 
renunciation of the partnership, he cannot claim any of its 
subsequent profits, and his partners may proceed to dis- 
solve the partnership. As to the partners, this renuncia- 
tion ends the partnership. Btit as to all other persons the 
liabilities of the retiring partner continue until proper no- 
tice is given. General notice is sufficient as to the public 
in general ; but as to such persons as have had dealings 
with the firm, actual notice must be given. A partner re- 
tiring from the partnership, in order to relieve himself from 
further habilities -of the firm, must give actual notice of 
such retirement, and of the dissolution of the partnership, 
to such persons as have been accustomed to deal with it. 
It is not essential that such notice shall be given in any 
particular form; it may be verbal, or' in writing; it may 
be expressed, or it may be implied from circumstances. It 



234 BUSINESS LAWS FOR BUSINESS MEN. 

must appear, however, with reasonable certainty, that such 
persons in some way received actual notice. This is so, 
because established business relations might lead such 
parties more readily to give the firm credit. Moreover, 
they are known to the firm, and may be readily, in some 
proper way, notified. Such notice given in a regular news- 
paper of general circulation, published in the city, town, 
or county where the partnership business is carried on, is 
the usual method of giving information ; and this will be 
sufficient, when continued for a reasonable length of time, — 
this depending somewhat upon the nature, extent, and place 
of the business. 

Civil Code, Sections 2417, 2418. 

Section 410.— POWER OF MAJORITY OF PART- 
NERS. — Where the partnership consists of more than two 
members, the decision of the majority binds the firm in the 
conduct of its business. The minority must be consulted 
in good faith, and when this is done the majority of the 
members have a right to control the manner of conducting 
the business. The majority can govern only in the due 
course of business, and cannot change the general character 
of the business against the will of one dissenting partner. 
Civil Code, Section 2428. 

Section 411.— AUTHORITY OF INDIVIDUAL PART- 
NER. — Every general partner is agent for the partnership 
in the transaction of its business, and has authority to 
do whatever is necessary to carry on such business in the 
ordinary manner, and for this purpose may bind his co- 
partners by an agreement in writing. Each partner is the 
general agent of his copartners as to firm business, and the 
members of the firm are considered as sanctioning his 
contracts. Whenever there are written articles, or par- 
ticular stipulations between the partners, these will regu- 
late their respective power and authority as between them- 
selves, although not, if unknown, in their dealings with 



busine:ss contracts and le:gal obligations. 235 

third persons. But independently of any such articles or 
stipulations, each partner possesses an equal and general 
power and authority in behalf of the firm, to transfer, 
pledge, exchange, or otherwise dispose of the partnership 
property and effects, for any and all purposes within the 
scope and objects of the partnership, and in the course of its 
trade and business. One partner by virtue of that relation 
is constituted a general agent for another as to all matters 
within the scope of the partnership dealings, and has com- 
municated to him, by virtue of that relation, all authority 
necessary for carrying on the partnership, and all such 
authority as is usually exercised by partners in the busi- 
ness in which they are engaged. Any restrictions which, 
by agreement amongst the partners, are attempted to be 
imposed upon the authority which one possesses as a gen- 
eral agent for the other, are operative only between the 
partners themselves, and do not limit the authority as to 
third persons, who acquire rights by their exercise, unless 
they know that such restrictions have been made. Each 
partner may enter into any contracts or engagements on 
behalf of the firm in the ordinary trade and business ; as, 
for example, by buying, or selling, or pledging goods, or by 
paying, or receiving, or borrowing moneys, or by drawing, 
or negotiating, or indorsing, or accepting bills of exchange, 
and promissory notes, and checks, and other negotiable 
securities, or by procuring insurance for the firm, or by 
doing any acts which are appropriate to such trade or busi- 
ness, according to the common course and usages of the 
business. So, each partner may consign goods to an agent 
or factor for sale on account of the firm, and give instruc- 
tions and orders relating to the sale. All such contracts and 
engagements, acts and things, he has authority to make and 
do in the name of the firm ; and in order to bind the firm, 
they must ordinarily be made and done in the name of the 
firm, otherwise they will bind the individual partner only. 
Civil Code, Section 2429. 



236 busin:Ess laws i^or busini:ss men. 

Section 412.— WHAT PARTNER CANNOT DO.— 

There are some things which the law of CaHfornia specially 
declares one partner alone has no authority to do. (i) He 
cannot make an assignment of any portion of the partner- 
ship property to a creditor, or to a third person in trust for 
creditors. (2) He cannot dispose of the good-will of the 
business. (3) He cannot dispose of the whole of the part- 
nership property at once, unless it consists entirely of mer- 
chandise. (4) He has no authority to do any act which 
would make it impossible to carry on the ordinary business 
of the partnership. (5) One partner has no authority to 
confess a judgment against the partnership. (6) One part- 
ner cannot submit a partnership claim to arbitration. 
Civil Code, Section 2430. 

Section 413.— PARTNER ENGAGING IN OTHER 
BUSINESS. — A general partner, who agrees to give his 
personal attention to the business of the partnership, may 
not engage in any business which gives him an interest 
adverse to that of the partnership, or which prevents him 
from giving to such business all the attention which would 
be advantageous to it. A partner may engage in any sep- 
arate business which does not create an interest adverse 
to the partnership, and which does not take too much of 
his time from the firm's business. 

Civil Code, Sections 2436, 2437. 

Section 414.— GENERAL LIABILITY OF PART- 
NER. — Every general partner is liable to third persons 
for all the obligations of the partnership, jointly with his 
copartners. 

Civil Code, Section 2442. 

Section 415.— LIABILITY OF ONE WHO PERMITS 
HIMSELF TO BE HELD OUT AS A PARTNER.— Any 

one permitting himself to be represented as a partner is 
liable as such to third persons to whom such representation 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 237 

is communicated, and who, on the faith of it, give credit 
to the partnership. Thus, one who is not actually a part- 
ner may make himself liable for the partnership debts, if 
he knows that he is being represented by the firm as a 
partner in it, and allows such representation to be made, 
and it is acted upon in good faith. 
Civil Code, Section 2444. 

Section 416.— DOING BUSINESS UNDER FICTI- 
TIOUS NAME. — The law provides that every partnership 
transacting business in this State under a fictitious name, 
or designation not showing the names of the persons inter- 
ested as partners in such business, must file with the clerk 
of the county in which its principal place of business is 
situated, a certificate stating the names in full of all the 
members of such partnership and their places of residence, 
and must publish the same once a week for four successive 
weeks, in a newspaper published in the county, if there be 
one, and if there be none in such county, then in a news- 
paper published in an adjoining county. There is one ex- 
ception, in the case where a commercial or banking partner- 
ship, established and doing business in a foreign country, 
seeks to do business in this State ; a foreign firm may use 
the same partnership name it uses at home, although ficti- 
tious, and although it does not show the names of the per- 
sons interested as partners. The certificate must be signed 
by the^partners, and acknowledged by them, and must be 
published within one month after the formation or com- 
mencement of the partnership. A new certificate must be 
made and published whenever there is a change in the 
membership of the partnership. 

Civil Code., Sections 2466, 2467, 2468, 2469. 

Section 417.— SPECIAL PARTNERSHIPS.— The law 

of France has long provided for a kind of partnership known 
as "special partnership," which differs from a general part- 
nership in several important particulars, and some of the 



238 busine:ss laws for business men. 

States of this country have copied the French law and made 
it a part of their statutes. CaHfornia is one of the States 
which have adopted the law on special partnerships, and 
fully recognizes by statute the existence and rights and 
liabilities of special partners. A special partnership may 
be formed in this State by two or more persons, for the 
transaction of any business except banking or insurance. 
A special partnership may consist of one or more general 
partners and one or more special partners. 

Section 418.— CERTIFIED STATEMENT OF SPE- 
CIAL PARTNERSHIP.— When a special partnership is 
formed, the partners must sign a certificate stating the 
name under which the partnership is to be conducted; the 
general nature of the business intended to be transacted; 
the names of all the partners, and their residences, speci- 
fying which are general and which are special partners ; 
the amount of capital which each special partner has con- 
tributed to the common stock; and the time at which the 
partnership will begin and end. This certificate must be 
acknowledged and recorded in all the counties in which 
the firm has places of business. An affidavit of each of 
the partners must be filed for record with the certificate, 
stating that each of the special partners has paid in the 
sum named in the certificate. The certificate, or a state- 
ment of its substance, must also be published in a news- 
paper in the county where the original certificate is filed ; 
and if there is no newspaper in that county, then the pub- 
lication must be made in the nearest newspaper; and this 
publication must be made once a week for four successive 
weeks, beginning within one week from the time of filing 
the certificate for record. 

Civil Code, Sections 2479, 2480, 2481, 2483, 2484. 

Section 419.— SPECIAL PARTNERSHIP— LIABIL- 
ITY OF THE PARTNERS.— The general partners in a 
special partnership are liable to the same extent as partners 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 239 

in a strictly general partnership. They are each liable for 
all the debts of the firm. But a special partner is only liable 
for the debts of the firm to the extent of the capital he 
has put into the business. A special partner may do things 
which will make him liable as a general partner; for if it 
appears that he has wilfully made a false statement in the 
certificate of partnership, or if he wilfully interferes with 
the business of the firm, or if he represents himself as a 
general partner in the firm, he will be liable as a general 
partner; that is, he will be liable for all debts of the firm. 
Civil Code, Sections 2500, 2501. 

Section 420.— RIGHTS OF SPECIAL PARTNERS.— 

Only the general partners have authority to transact the 
business of a special partnership. The special partner, 
while he has no right to engage in or interfere with the 
authority of the general partners to conduct the business 
of the firm, yet may at all times investigate the partnership 
affairs, and advise his partners, or their agents, as to their 
management of the business. A special partner may lend 
money to the partnership, or advance money for it, and 
take from it security, and as to such loans or advances he 
will have the same rights as any other creditor; but in case 
of the insolvency of the firm, all other claims which he 
may have against it will be postponed until all other credit- 
ors are_^ satisfied. In all matters relating to a special part- 
nership, the general partners may sue and be sued alone, 
as if there were no special partners. No special partner, 
under any pretense, has any right to withdraw any of the 
capital invested by him in the partnership, during its con- 
tinuance. 

Civil Code, Sections 2489, 2490, 2491, 2492, 2493. 

Section 421.— INTEREST AND PROFITS OF SPE- 
CIAL PARTNER. — A special partner may receive such 
interest on his money invested, and such proportion of the 



240 BUSINESS LAWS FOR BUSIN:ESS MEN. 

profits, as may be agreed upon between him and the general 
partners. 

Section 422.— MINING PARTNERSHIPS.— A mining 
partnership is different in its nature and creation from the 
ordinary partnerships known to commercial life. An ex- 
press agreement to become partners, or to share the profits 
and losses, is not necessary in the creation or existence of 
a mining partnership. The law of California provides, that 
a mining partnership arises from the ownership of shares 
or interests in the mine, and the working of the mine for 
the purpose of extracting the mineral from it. The miners 
must own or have acquired the mine, and t)e actually en- 
gaged in working it; and when they do so, the law looks 
upon their relations as those of a partnership, without the 
necessity of a written or oral agreement to share profits 
and losses. It is not necessary that the miners hold the 
legal title to the mine in order to become partners. If 
they acquire a mining claim, though it is not patented, 
and may never be, still they are mining partners if they 
actually engage in working the mine for the purpose of 
extracting the mineral from it. The mining partners need 
not all have equal interests in the profits. If a number of 
miners acquire a claim and work it, on shares, whether 
the shares be equal or not, it is a mining partnership. The 
essential difference between the ordinary partnerships and 
a mining partnership is, that in a mining partnership there 
is no choice of partners. One member of a mining part- 
nership may sell his interest or share in the mine, and the 
partnership is not dissolved, and as to those who continue 
to work the mine, the partnership continues to exist ; while 
in a general partnership, the sale by one partner dissolves 
the partnership, because none of the general partners can 
force a new member into the firm. 

Civil Code, Sections 251 1, 2512. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 241 

Section 423.~PROFITS AND LOSSES IN MINING 
PARTNERSHIP. — A mining partner shares in the profits 
and losses in proportion to the interest or share which he 
owns in the whole mine, and the proportion which his in- 
terest bears to the whole partnership capital or whole num- 
ber of shares. 

Section 424.— LIABILITY OF MINING PARTNERS. 

— Each mining partner is, as to third parties, liable for the 
entire debts of the partnership. If one mining partner pays 
the debts, or advances money for the use of the partner- 
ship, he has a lien on the property of the partnership for 
his money. And the law declares that this lien shall exist, 
even though there is an agreement among the partners that 
it must not. 

Civil Code, Section 2514. 

Section 425.— MINING GROUND PARTNERSHIP 
PROPERTY. — The mining ground owned and worked by 
partners in mining, whether purchased with partnership 
funds or not, is partnership property. But a mere agree- 
ment to work a mine in the future, upon the happening of 
a contingency, does not make it partnership property. 
Justice Temple, of the Supreme Court of California, in 
the mining case of Dorsey vs. Newcomer, speaking of the 
partnership property of miners, said : "It is not always easy 
to determine what constitutes the partnership property of a 
mining partnership. The statute provides that the mining 
ground owned and worked by partners in mining, whether 
purchased by the partnership or not, is partnership property. 
It does not follow that property other than the ground 
owned and worked may not also be partnership property. 
No doubt, other property acquired by the partnership for 
the purpose of aiding in working the mining claim, such 
as a mill or mill site, would also be property of the partner- 
ship. So, other mining ground acquired for the purpose of 
working with the mining ground already being worked, and 
16 



242 busine:ss laws i^or business men. 

so situated that it can be worked with the original claim as 
parts of one mine, would be partnership property. And, 
generally, property acquired by the partnership by the use 
of partnership funds, as distinguished from the individuals 
constituting the firm, may be so regarded. But the statute 
evidently distinguishes between ground owned or acquired 
for the purpose of working, and ground actually worked. 
It is only the last that in general can be regarded as part- 
nership property, when not acquired by the partnership, or 
by the use of its funds." (Decided by the Supreme Court 
of California, in the case of Thomas B. Dorsey vs J. T. 
Newcomer, which decision is printed in Volume 121 of the 
California Reports, page 213.) 

Civil Code, Section 2515. 

Section 426.— NEW MEMBER OF MINING PART- 
NERSHIP. — One of the partners in a mining partnership 
may sell his interest in the mine and business without dis- 
solving the partnership. And the purchaser, from the date 
of his purchase, becomes a member of the partnership. But 
the purchaser of an interest in the mining ground takes it 
subject to the liens existing in favor of the partners, for 
debts due the creditors, or advances made for the benefit 
of the partnership, of which he has notice ; and the pur- 
chaser of the interest of a partner in a mine when the part- 
ners are engaged in working it, is charged by the law with 
notice of all liens resulting from the relation of the part- 
ners to each other and to the creditors of the partnership. 
Civil Code, Sections 2516, 2517, 2518. 

Section 427.— CONTRACT IN WRITING.— No member 
ot a mining partnership, or any agent or manager of the 
firm, can bind the partnership by a contract in writing, ex- 
cept by express authority from all the members of the firm. 
He cannot bind the partnership by making a promissory 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 243 

note, or by any agreement in writing affecting the partner- 
ship property. 

Civil Code, Section 2519. 

Section 428.— OWNERS OF MAJORITY OF SHARES 
GOVERN CONDUCT OF MINE.— The decision of the 
partners owning a majority of the shares or interests in a 
mining partnership will always control the conduct of its 
business. • As the mining property can only be used as 
a whole, it is indispensable in conducting the business of 
mining that those owning the larger portion of the property 
should have the power to control, in case all cannot agree, 
for otherwise the work might become wholly discontinued 
at any time. The powders of the individual members of a 
mining partnership are much more limited than are the 
powers of the individual members of a purely commercial 
or trading partnership. What may be necessary and proper 
for carrying on the business of mining, for the joint benefit 
of all concerned, must always be determined by those own- 
ing and holding in the aggregate the majority interest in 
the property. And if the powers wdiich are thus exercised 
by the majority are not necessary and proper for the suc- 
cess of the enterprise, those whose interests may be im- 
periled or disastrously affected by the improper conduct of 
the majority have the right to resort to the courts for 
redress and protection. 

Civil Code, Section 2520. 

Section 420.— DURATION OF PARTNERSHIP.— If no 

term is prescribed by agreement for the duration of a part- 
nership, a general partnership will continue for an indefinite 
time, until dissolved by mutual consent, or by a partner, or 
by the law. 

Section 430.— TOTAL DISSOLUTION OF PART- 
NERSHIP. — A general partnership is dissolved as to all 
of the partners: (i) By lapse of the time prescribed by 



244 busine:ss laws for business . men. 

agreement for its duration; (2) By the expressed will of 
any partner, if there is no such agreement; (3) By the 
death of a partner; (4) By the transfer to a person, not a 
partner, of the interest of any partner in the partnership 
property; (5) By war, or the prohibition of commercial 
intercourse between the country in which one partner re- 
sides and that in which another resides ; or, (6) By a judg- 
ment of dissolution. But, as we have already seen, there is 
an exception in the case of a mining partnership, which is 
not dissolved by the death of one partner or the sale of 
the partner's interest. 

Civil Code, Section 2450. 

Section 431.— PARTIAL DISSOLUTION OF PART- 
NERSHIP. — A general partnership may be dissolved, as 
to himself only, by the expressed will of any partner, not- 
withstanding his agreement for its continuance; subject, 
however, to liability to his copartners for any damage 
caused them. 

Civil Code, Section 2451. 

Section 432.— WHEN PARTNER ENTITLED TO DIS- 
SOLUTION. — A partner is entitled to a dissolution, (i) 
When he, or another partner, becomes legally incapable 
of contracting; (2) When another partner fails to perform 
his duties under the agreement of partnership, or is guilty 
of serious misconduct; or, (3) When the business of the 
partnership can be carried on only at a permanent loss. 

Partners may, at the time of forming the partnership, 
prescribe the period for which it shall endure, and how and 
when it may be determined. Its continuance may be for 
a definite term, or it may be at the will of the partners ; 
and it is well settled that a partnership at will may be 
terminated at the pleasure of any member of the firm, so 
long as he acts without fraudulent intent. As partnerships 
are formed by the mutual agreement of all the partners, so 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 245 

may they be altered, modified, or dissolved, by like agree- 
ment. A partnership for a definite period may be dissolved 
by mutual consent. But an express agreement to dis- 
solve is not necessary. Words and acts implying such 
intention are sufficient. If partners, by mutual consent, 
cease to do business, and divide the partnership property, 
this amounts to a dissolution, as much as if done by an 
express agreement to that effect. A partnership is none 
the less ended by reason of the fact that certain specific 
property of the firm, after a settlement and adjustment of 
the firm business, remains unsold, and that each partner, 
under the settlement, retains his proportionate part of such 
property. 

Notwithstanding that a time for the dissolution of a firm 
may be fixed by partnership articles, or that the partners 
may dissolve by agreement, express or implied, before such 
time, the partnership may be dissolved by the happening 
of any of the events which, in law, are held to effect that 
result. Thus, the withdrawal of a partner causes a dis- 
solution of the firm ; and the introduction of a new member 
into an existing partnership works its dissolution, and the 
creation of a new partnership. If both partners refuse to 
perform their part of the partnership agreement, there is 
no law requiring, or recognizing, a continuance of the part- 
nership. A firm is dissolved when it ceases to do the busi- 
ness for w4iich it was organized. 

The mere fact, alone, that a partnership is insolvent does 
not operate as a dissolution of the firm. There must be a 
stoppage of payment, assignment, or act amounting in law 
to a declaration of insolvency, to work a dissolution. An 
assignment, however, by copartners, for the benefit of their 
creditors, of the entire firm assets, except property exempt 
from execution, operates as a dissolution of the partnership. 

The mere filing of an attachment against partnership 
property does not dissolve the partnership ; nor will the 
mere seizure of such property under a writ of attachment 
have that effect ; and it has been held bv the courts that the 



246 BUSINESS LAWS FOR BUSINESS MEN. 

seizure under execution of the interest of a defendant in 
partnership property does not dissolve the partnership ; 
but a levy of execution against one partner on his interest 
in the firm, and the sale of such interest, does dissolve the 
firm. 

A sale which practically includes all of the property used 
by a firm in carrying on its business, whether made by the 
firm or by a member, operates as a dissolution of the part- 
nership. The destruction of the property which is the sub- 
ject matter of the copartnership is another cause which 
will work a dissolution. A court of equity may decree the 
dissolution of a partnership during the term for which it 
was entered into, and declare it void, where there is fraud, 
imposition, misrepresentation, or oppression in the original 
agreement. 

Equity has jurisdiction, where a person has been induced 
by fraudulent representation to enter into a partnership, 
to rescind the contract at his instance, and put an end to it. 
Misrepresentation of material facts is a ground for setting 
aside a partnership contract. A person who has been in- 
duced to enter into a partnership, by a material misrepre- 
sentation of the other party, is entitled to have the contract 
set aside. 

One partner cannot, by any act of his own, and at his 
will, terminate a partnership for a fixed period, before that 
period has elapsed. A partnership agreement, like any 
other, is binding upon the parties, and they must adhere 
to its terms. Neither partner is at liberty to recede from 
it against the will of the other, without a sufficient cause. 

A court of equity, however, may decree a dissolution of 
the partnership, for causes arising subsequently to the 
formation of the contract, founded upon misconduct, or 
fraud, or violation of duty, of one partner; or on account 
of the inability or incapacity of one partner to perform his 
obligations and duties, and to contribute his skill, labor, 
and diligence in the promotion and accomplishment of the 
objects of the partnership ; or for the existence of facts 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 247 

rendering it impracticable to carry on the undertaking for 
which the partnership was formed. 

A court of equity will dissolve a partnership where all 
confidence between the partners has been destroyed, so 
that they cannot proceed together in prosecuting the busi- 
ness for which it w^as formed. And this result follows, 
not only where such want of confidence is occasioned by 
the misconduct or gross mismanagement of the partner 
against whom the dissolution is sought, but also when such 
want of confidence and distrust has arisen from other cir- 
cumstances, provided it has become such as cannot prob- 
ably be overcome. But a partner who, by his own wilful 
misconduct, has caused such want of confidence, will not 
be allow^ed to take advantage of it to procure a dissolution. 
If a partner's acts are inconsistent with the duty of part- 
ners, and of a nature to destroy the mutual confidence which 
ought to subsist between them, and makes it impossible 
that the business can be conducted in partnership Avith 
benefit to either party, a court of equity will decree a dis- 
solution before the expiration of the term for which the 
partnership was entered into. The same is true where the 
circumstances have so changed as to render it impossible 
to carry on the partnership without injury to all the part- 
ners. A partnership will be dissolved where one of the 
firm has deliberately resolved to break up and ruin its 
business, or where ill feeling between the partners renders 
it impossible to conduct the business successfully. 

The wrongful exclusion of one partner from the business, 
or refusal to allow him to inspect the books, is a cause for 
dissolution of the partnership. 

It is a sufficient cause for dissolution of a partnership 
that it clearly appears that the business for which the part- 
nership was formed is impracticable, or cannot be carried 
on except at a loss. 

A partner's failure or refusal to comply with the terms 
of the partnership agreement as to contributing capital or 



248 busine:ss laws i^or business men. 

funds required for the successful prosecution of the busi- 
ness is also a cause for dissolution, whether such failure 
or refusal arises from disinclination or inability. Thus, 
if a partnership is formed for the purpose of buying and 
selling land, each partner to furnish an equal share of 
money, the refusal of one to make the necessary advances 
would be a good cause for putting an end to the partner- 
ship. And, if a partner refuses to manufacture articles as 
agreed, so as to make the works profitable, it is a cause 
for dissolution. 

If a partner, by reason of his infirmities, becomes totally 
incapable of performing the partnership duties incumbent 
upon him, a dissolution will be decreed, not only to protect 
the partner who has beco'me incapacitated, but to relieve 
the other from the difficult position in which he is placed. 
Confirmed and incurable insanity is a ground for dissolv- 
ing a partnership, and when it is shown that a partner 
is so far disordered in his mind as to be incapable of con- 
ducting the firm business according to the terms of the 
contract of copartnership, a court of equity will dissolve 
the firm. After an adjudication of the insanity of one part- 
ner, the continuing partner may apply for a dissolution 
of the partnership, if he so desires ; or, if it is a partner- 
ship at will, he may dissolve it of his own volition ; but 
where one partner has been adjudged insane, and the re- 
maining partner continues the business as before, without 
objection or notice to any one, it is presumed that he did 
not intend a dissolution of the firm, but that he waited 
to determine whether the incapacity of his partner would 
prove merely temporary, and whether it would become prac- 
ticable for him to resume business. So long as he thus con- 
tinues to carry on the business, without seeking to dissolve 
the partnership, there is no dissolution, nor is he excused 
from accounting for the profits derived by him from the 
business of the firm. 

Partners may provide in their contract that certain acts 
or conduct shall operate to dissolve the partnership ; but, 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 249 

in the absence of special agreement, courts may dissolve 
a partnership for misconduct, gross neglect, or breach of 
partnership duty. As a general rule, gross misconduct, 
want of good faith, or gross want of diligence, or such 
cause as is productive of serious and permanent injury to 
the partnership concerns, or renders it impracticable to 
carry on the partnership business, is proper ground for 
dissolution. Habitual intoxication, extravagance, and dis- 
honesty are good grounds for dissolution. 

If quarrels, dissensions, or chronic hostility between part- 
ners are of such serious and permanent character as to 
prevent the profitable continuance of the partnership busi- 
ness, on the terms of the agreement between the partners, 
a dissolution will be decreed. Violent disputes, ill will, 
or dissensions between the partners, which entirely prevent 
the beneficial effects of a connection, are sufficient to justify 
a decree of dissolution. A dissolution should be decreed 
where it appears that the partners are in a constant state 
of quarrel; that one makes a rule of going to the office at 
an early hour, opening all the letters addressed to the firm, 
and failing to communicate the contents to the other; that 
the other partner is always arbitrary in his action ; and that, 
generally, what one wants to do the other objects to. 

A court of equity will not dissolve a copartnership unless 
cause is shown, and the mere desire of a partner for a 
dissolution is not a sufficient cause. It is not for every 
act of misconduct on the part of one partner that a court 
of equity, at the instance of another partner, will dissolve 
the partnership and close up the affairs of the company. 
The court will require a strong case to be made, and it is a 
general principle that a court has no jurisdiction to make 
a separation between partners for trifling causes, or tem- 
porary grievances, involving no permanent mischief. Thus, 
it is not sufficient cause for the dissolution of a firm that 
a loss occurs to it through a partner's mere error of judg- 
ment, or that there is a mere dissatisfaction between part- 
ners. A court of equity will not decree a dissolution of 



250 BUSINESS LAWS FOR BUSINESS MEN. 

a partnership, unless it is shown that the defendant has 
substantially failed in the performance of his part of the 
partnership agreement. 

Civil Code, Section 2452. 

Section 433.— NOTICE OF DISSOLUTION OF PART- 
NERSHIP. — The liability of a general partner for the acts 
of his copartners continues, even after a dissolution of the 
copartnership, in favor of persons who have had dealings 
with and given credit to the partnership during its exist- 
ence, until they have had personal notice of the dissolution. 
The liability of a partner may extend beyond the indebted- 
ness existing at the dissolution, and include indebtedness 
subsequently contracted in favor of persons relying on the 
partnership, and who did not have any notice of its disso- 
lution. Those who have dealt with the firm before disso- 
lution are entitled to hold all the partners liable for debts 
contracted afterwards in good faith, in the belief that the 
firm still continues, and in reliance upon its assets and the 
personal responsibility of its members. As to such cus- 
tomers, actual notice is required to exempt from liability 
any member of the firm, though he has retired. The fact 
that notice was mailed to such customer, or was published 
in a newspaper of general circulation, and such newspaper 
mailed to a creditor with a red line drawn about the notice 
for the purpose of attracting attention to it, or that the dis- 
solution had attained general notoriety, cannot defeat the 
customer's claim to hold all the members of the firm an- 
swerable, if it appears that he did not have actual notice of 
the dissolution. Persons who have not dealt with the firm 
before its dissolution are not entitled to actual notice, and 
cannot hold a retiring member answerable if notice of the 
dissolution has been given by publication in a newspaper. 
A change of the partnership name, which plainly indicates 
the withdrawal of a partner, is sufficient notice of the fact 
of such withdrawal to ah persons to whom it is communi- 
cated ; but a change in the name, which does not contain 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 251 

such an indication, is not notice of the withdrawal of any 
partner. 

Civil Code, Sections 2453, 2454. 

Section 434.— WINDING UP THE PARTNERSHIP 
AFFAIRS. — After the dissolution of a partnership, its 
affairs must be wound up, and its property disposed of. 
No new contracts are to be made, no new business trans- 
acted ; but only the final disposition of the assets of the 
firm, the collection of the accounts, the payment of the 
debts, the distribution of the property left over. Any mem- 
ber of a general partnership may act in the winding up of 
its affairs. By consent of all the partners, the final settle- 
ment of the affairs of the firm may be committed to one 
of the partners, and the other partners will then have no 
right to act. The partner authorized to act in liquidation 
may collect, compromise, or release any debts due to the 
partnership, and pay or compromise any claims against it, 
and dispose of the partnership property; he may also in- 
dorse, in the name of the firm, promissory notes or other 
obligations held by the partnership, for the purpose of col- 
lecting them, but he cannot create any new obligation in 
the name of the firm. 

Civil Code, Sections 2459, 2460, 2461, 2462. 

Section 435.— RIGHTS OF PARTNERS AFTER DIS- 
SOLUTION. — Each partner, after the dissolution of the 
firm, has an equal right to the possession of its assets. And 
if the liquidation of the partnership affairs is not left in 
the hands of certain members of the firm, by consent of 
all the partners, then each partner has the right to do 
whatever acts are necessary to complete the business of 
the partnership, and fulfil its contracts ; and, as each partner 
is interested in seeing the business closed, by the collection 
of the assets, and the payment of the firm's obligations, and 
a division of the remainder, each may take steps looking 
to that end, and exercise the power vested in him as a 



252 busine:ss laws for business men. 

partner to dispose of and preserve the property of the firm 
and pay its obHgations. After the dissolution of the firm, 
each of the partners has the right to enter into the same 
or any other business on his own account. If property 
of the firm is in the possession of one of the members of 
the partnership, he has the power to take such measures 
as are necessary for its preservation and protection. Each 
of the partners, in the absence of an agreement to the con- 
trary, is bound to give his services to the business of the 
firm, and this remains true after its dissolution so far as 
is necessary to the winding up of its affairs. After the 
dissolution of the partnership, each partner remains liable 
for the indebtedness of the firm, to the same extent as 
before. 

Surveys of Land 

Section 436.— PUBLIC AND PRIVATE LAND SUR- 
VEYS. — One of the fruitful causes of litigation in Califor- 
nia, litigation which involves the title and possession of 
land in nearly every county in the State, and the legal rights 
and obligations of thousands of people, is the question of 
the correctness of public and private land surveys. There- 
fore, every owner of land, especially in the rural districts 
of the State, is interested in knowing something about the 
law relative to public and private land surveys. 

Section 437.— GOVERNMENT SURVEYS.— It is im- 
portant for the land owner, when he believes or is informed 
that others are encroaching upon the lines of his land as 
originally surveyed and established, to know what the law 
is as to Government surveys. For private surveys, made 
by County Surveyors or other surveyors at the request of 
individual owners, can have but one object, and that is to 
find where the lines were originally established by the Gov- 
ernment survey. For the purpose of giving such informa- 
tion as may be of value to the land owner, the following 



busine:ss contracts and le:gal obligations. 253 

sections under the head of "Surveys of Land" have been 
prepared. 

Section 438.— GOVERNMENT SURVEY ACCEPTED 
AND APPROVED IS FIXED AND UNCHANGEABLE. 

— First, it is important to know, that a survey accepted and 
approved by the Government of the United States is fixed 
and unchangeable. People may think that the original 
survey was not correct, but that makes no difference. As 
a matter of fact, very few Township surveys are absolutely 
correct, and in many of them serious errors were made 
as reported by the Government surveyors. And, too, many 
of those who took contracts to survey Government lands 
were dishonest or incompetent, or both together, and in- 
stead of going over the ground, this class of surveyors con- 
tented themselves with sitting on a rock and guessing at 
the surrounding country. But it was in the interest of 
the peace and security of settlers upon the public domain 
that their occupation of the land should not be disturbed 
afterwards by the claim that the Government survey was 
not properly or correctly made; and as all titles to land 
in this country run back to the original ownership of the 
Government, it is evident that the extent and lines of ^ny 
particular lot of land must rest upon the original survey 
made for and accepted by the United States ; and for the 
purpose of security in titles, and so that private surveys 
may have something solid to rest upon, the Government of 
the United States has adopted the unvarying rule, that a 
survey accepted and approved by the Government of the 
United States, whether correct or incorrect, is final and 
conclusive, fixed and unchangeable, and neither oral evi- 
dence nor private surveys can be admitted to contradict it. 

Section 439.— FINDING ORIGINAL LOCATION OF 
TOWNSHIP LINE.— After many years, it frequently hap- 
pens that adjoining land owners will differ as to the place 
where the Government surveyor really located a Township 



254 BUSINi:SS LAWS FOR BUSINESS MEN. 

line, and to ascertain its true location in the lapse of a 
quarter of a century or more may be a matter of much dif- 
ficulty for private surveyors. Mounds of stone may have 
fallen down and become scattered so as to lose their iden- 
tity; corner stakes may have been burned away or pulled 
up and cast aside ; witness trees may have disappeared, 
by fire, or the ax, or by natural decay, or force of storms; 
so that all or nearly all of the monuments marked and 
placed upon the line by the Government surveyor, as he 
ran and established it, may have become obliterated and 
lost in the course of time. But the law has established 
certain rules and regulations for the guidance of private 
surveyors under such circumstances, which rules and regu- 
lations must always be followed by a surveyor seeking to 
locate the place where the line was originally established, 
if he expects to make a survey that will be of any value 
to his employer. 

Section 440.— FIELD NOTES AND MAPS.— A private 
surveyor, seeking to find the true location of the Govern- 
ment lines, should have with him the field notes and maps 
of the original survey, certified copies of which can be ob- 
tained from the office of the United States Surveyor- 
General through the ofiice at San Francisco. The field 
notes are always to be considered before the maps. The 
field notes made by the Government surveyor afford the 
best evidence of the place where the line was located, and 
control the maps or plats. The maps are made from the 
field notes, therefore the field notes are entitled to first 
consideration. 

Section 441.— MONUMENTS ON THE GROUND.— 

The private surveyor, employed to locate the Government 
line, must find the monuments on the ground, called for 
by the field notes. If the original stakes, and mounds of 
rock, and witness trees, marked for Section corners and 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 255 

quarter Section corners, and closing corners on the Town- 
ship Hne, are all in place, where the Government surveyor 
put them, and as called for by the field notes, the work of 
the private surveyor will be easy. But in controversies 
which arise over boundaries of land, it nearly always hap- 
pens that most of the artificial monuments, the stakes, and 
mounds, have disappeared, and that some of the witness 
trees cannot be found. It is the duty of the private sur- 
veyor to try to find the stakes set by the Government sur- 
/pyor, of course : but if he finds stakes, with the right marks 
for certain corners, it may be denied that they are the origi- 
nal stakes, or it may be claimed that they have been moved 
from the place wdiere the original surveyor placed them. 
So that the natural objects called for by the field notes, 
objects which never change, and cannot be moved, such 
as creeks, rivers, bluffs, roads or trails, ponds, ridges, or 
other permanent features of the earth's surface, when found 
by the private surveyor in the position corresponding to 
the calls of the field notes, are really the most certain and 
satisfactory evidence that he is on the right line. And 
from the observations above made, it may be said, that 
the rule as to monuments which must govern the private 
surveyor in his work, and which Avill always be safe for 
the land owner for whom the work is being done, is as 
follows : It was the duty of the Government surveyor to 
note all natural objects in his field notes, and in trying to 
find \yhere the Township line was actually run and estab- 
lished by the Government survey, the private surveyor 
must give careful consideration, with reference to the field 
notes, to permanent monuments set, their size, kind, and 
location, with reference to the corners which they are in- 
tended to perpetuate ; bearing or witness trees marked in 
the field ; all nearest known original corners, in all direc- 
tions, following section lines ; all natural objects called for 
by the field notes, such as creeks, rivers, blufifs, roads or 
trails, ponds, ridges, or other unchanging features of the 
earth's surface. 



256 BUSINESS LAWS i^oR busine:ss mkn. 

Section 442.— TOWNSHIPS.— The public lands of the 
United States are primarily surveyed into uniform rectangu- 
lar tracts, six miles square, called Townships, bounded by 
lines conforming to the cardinal points — North, South, East, 
and West — and containing, as nearly as may be, 23,040 
acres. 



Section 443.— SECTIONS.— The Townships are sub- 
divided into thirty-six tracts, one mile square, called Sec- 
tions, containing in full Sections 640 acres. The Sections 
in a Township are numbered consecutively from i to 36, 
beginning at the Northeast corner of the Township and 
numbering West with the North tier of Sections, thence 
East with the second tier. West with the third tier, and so 
on to Section 36 in the Southeast angle of the Township. 

Section 444.— SUBDIVISIONS OF SECTIONS.— Sec- 
tions are divided into four equal parts of 160 acres each, 
called quarter Sections, and each quarter Section is again 
divided into two half-quarter Sections of 80 acres, or four 
quarter-quarters containing 40 acres each. These are 
called Legal Subdivisions, and are the only divisions rec- 
ognized by the Government in disposing of the public lands, 
except where tracts are made fractional by water courses 
or other causes. When tracts are fractional, the smallest 
legal subdivision may contain less than 40 acres or more 
than 40 acres, and they are then designated as Lots, to 
distinguish them from the legal subdivisions which con- 
tain exactly 40 acres. The subdivisions of Sections are 
not actually surveyed and marked on the ground. Quarter 
section or half mile posts are established on the boundaries 
of the Sections ; but the interior subdivisional lines of Sec- 
tions are made only on the plats of Townships, at the 
Surveyor-General's office, and when the boundaries of these 
subdivisions are required to be established on the ground, 
it must be done by a private survey. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 257" 

Section 445.— PRINCIPAL MERIDIANS AND BASE 
LINES. — Two principal lines are established prior to the 
survey of the Townships — a north and south line denomi- 
nated a Principal Meridian, and an east and west line 
styled a Base Line. These lines constitute the basis of 
the public surveys, and are prerequisite to the laying out of 
the Township. 

Section 446. — RANGES. — Any number or series of Town- 
ships situated in a tier North and South are denominated 
a Range, and the Ranges are designated by numbers East' 
and West, as the case may be, from the governing merid- 
ians. The Townships in each Range are also numbered 
North or South from established base lines. 

Section 447.— STANDARD CORNERS.— At the time 
the parallels and base line are run, the Township, Section, 
and quarter Section corners are established thereon. As 
the Township and Section lines North are run from them, 
it follows that these corners will be common to two Town- 
ships, Sections, or quarter Sections North of the parallel 
or base line, and these are called Standard Corners. 

Section 448.— CLOSING CORNERS.— North and South 
lines are required to run on the true meridian. Hence, 
when ^the Township and Section lines below reach the 
parallels or base lines North, they will not close on the 
Standard Corners previously established, because of the 
convergency of the meridians, but will strike the line at 
a distance corresponding to the convergency; East of the 
Standard Corners if the field of operation be West of the 
governing meridian, and West of said corners if the sur- 
veys be East of the principal meridian. Another set of 
Township and Section corners is therefore established at 
the point of intersection with the standard or base line, 
and the distances of said corners from the corresponding 
standard corners previously set, are measured and noted 

17 



258 BUSINESS LAWS For business men. 

in the field book. The corners so estabHshed are called 
Closing Corners, and will, of course, be common to two 
Townships or Sections South of the base or standard line. 
No closing quarter vSection corners are established. 

Section 449.— TOWNSHIP CORNERS.— Township cor- 
ners are established at intervals of six miles each, and are 
perpetuated by the following modes: (i) The post is placed 
first in order, because circumstances render its use most 
common in practice. Corner posts are required to be four 
feet in length, and at least five inches in diameter, and are 
to be planted to the depth of two feet, the part projecting 
above the ground being squared to receive the marks re- 
quired to be cut upon them. When the corner is common 
to four Townships, the post is set cornerwise to the lines, 
presenting the angles to the cardinal points, and on each 
flattened side must be marked the number of the Town- 
ship, Range, and Section which it faces. Six notches will 
also be cut on each of the four edges. If the post is on 
a standard parallel or base line, and is common to only- 
two Townships on the North, six notches will be cut in 
the East, North, and West edges, and the letters '*S. C." 
(Standard Corner) will be cut on the flattened surface, but 
no notches will be cut in the South edge. If the post is 
common to two Townships South of the parallel or base 
line, six notches will be cut in the East, South, and West 
edges, but none in the North edge, and the letters "C. C." 
(Closing Corner) must be cut upon the flattened surface. 
The position of all Township corner posts must be wit- 
nessed by four bearing trees, one in each of the adjoining 
Townships, or by "pits," where trees cannot be found. 
(2) Township corner stones must be inserted in the ground 
not less than eight inches, with their sides to the cardinal 
points, and small mounds of stone should be constructed 
against the sides of them. The notches on the edges are 
the only marks required. (3) A tree in place, when em- 
ployed to perpetuate a Township corner, must be marked 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 259 

and witnessed in the same manner as township posts. 
(4) The post and mound is a common method of marking 
corners. Mounds at Township corners must be 5 feet in 
diameter at their base, and 2^2 feet in perpendicular height. 
Posts in Township mounds, therefore, require to be 4^ 
feet in length, so as to be planted 12 inches in the ground, 
and allow 12 inches to project above the mound. The pit 
for a Township mound will be 18 inches wide, 2 feet in 
length, and at least 12 inches deep, located 6 feet from 
post, and on opposite sides. At corners common to four 
Townships, the pits will be placed on the line and length- 
wise to them. On base and parallel lines, where the corners 
are common to only two Townships, three pits only will 
be dug — two in line on either side of the post, and one 
on the line North or South of the corner, as the case may 
be. By this means the standard and closing corners can 
be readily distinguished from each other. Posts in mounds 
should be notched, marked, and faced precisely as posts 
without the mound. 

Section 450.— SECTION CORNERS.— Section corners 
are established at intervals of i mile or 80 chains, and 
four modes of perpetuating corners are employed to mark 
them, — (i) Post for Section corner must be 4 feet in length 
and 4 inches in diameter, firmly planted or driven into the 
ground to the depth of 2 feet, the part projecting being 
squared to receive the required marks. When the corner 
is common to four sections, the post will be set corner- 
wise to the line, and on each flattened surface will be marked 
the number of the Section which it faces ; also, on the 
Northeast face, the number of the Township and Range 
will be cut. All 'mile posts on Township lines will have 
as many notches on the two corresponding edges as they 
are miles distant from the respective Township corners. 
Section posts in the interior of a Township will have as 
many notches on the South and East edges as they are 
miles from the South and East boundaries of the Township, 



260 busine:ss laws ^or business men. 

but no notches on the North and West edges. By this 
plan the corner can be identified thereafter, if the post be 
found lying upon the ground. All Section posts, whether 
in the interior of a Township or on a Township line, must 
be witnessed by four bearing trees, one in each of the 
adjoining Sections. When the requisite number of bear- 
ing trees cannot be found, the deficiency will be supplied 
by substituting pits i8 inches square, and not less than 
12 inches in depth. (2) Mounds at Section corners will 
be 4}^ feet in diameter at their base, and 2 feet in per- 
pendicular height; the post being 4 feet in length and in- 
serted 12 inches in the ground. The post must be not 
less than 3 inches square, and marked and witnessed the 
same as the post without the mound. At corners common 
to four Sections, the post in mound will be set with the 
edge to the cardinal points ; at corners common to only 
two Sections, the flattened sides of the post will face the 
cardinal points. (3) When stones are used for Section 
corners on Township lines, they will be set with their 
edges in the direction of the line ; but wdien standing for 
interior Section corners, they will be planted facing the 
North, and should be notched the same as Section posts 
similarly situated. No marks except the notches are re- 
quired, but they will be witnessed by trees or pits as re- 
quired where posts are used. A tree placed at a Section 
corner is marked the same as a Section post. 

Section 451.— QUARTER SECTION CORNERS.— 

Quarter Section corners are established at intervals of half 
a mile, or 40 chains, except in the North and West tiers of 
Sections in a Township. Where the Section lines exceed 
or fall short of 80 chains, in subdividing these Sections, the 
quarter post is established just 40 chains from the interior 
Section corner, throwing the excess or deficiency upon the 
last half mile. The intervals between the quarter posts 
and the North and West Township boundaries will there- 
fore be irregular. Quarter Section corners are not required 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 261 

to be established on the North boundary of the Northern 
tier of Sections in a Township South of and bordering on 
a standard parallel or base line. Quarter Section corners 
are perpetuated in the following manner: (i) Posts at 
quarter Section corners must be 4 feet in length and 4 
inches in diameter, and be planted or driven into the ground 
2 feet; the part projecting being flattened or squared, so 
as to present a smooth surface 3 inches in width. The 
only mark required on a quarter Section post is the char- 
acter ''34s." The corner must also be witnessed by two 
bearing trees. (2) Mounds at quarter Section corners will 
be 4^ feet in diameter at their base, and 2 feet in perpen- 
dicular height, the post being 4 feet in length and inserted 
in the ground 12 inches; it will also be marked and wit- 
nessed the same as the post without the mound. (3) Stones 
used for quarter Section corners must have the fraction 
"^" cut upon the West side of North and South lines, and 
on the North side of East and West lines, and must be wit- 
nessed by two bearing trees. (4) A tree, when found in 
place, should be marked and witnessed in the same manner 
as the post. 

Section 452.— MEANDER CORNERS.— At the points 
where Township or Section lines intersect large ponds, 
lakes, bayous, or navigable rivers, posts are established at 
the time of running the lines, which are called Meander 
Corners. Either of the four modes described for perpetu- 
ating corners may be employed for perpetuating meander 
corners, (i) No marking is required on meander posts, 
but they must be witnessed by two bearing trees or pits. 
They should also be firmly inserted in the ground. (2) 
The mound and- post at meander corners should be the 
same dimensions as those for the Section and quarter Sec- 
tion corners. The pit should be directly on the line, and 8 
links further from the water than the mound. When the 
pit cannot be so located, its course and distance from the 
corner should be stated in the field book. (3) Stones or 



262 BUSINESS LAWS FOR BUSINESS MEN. 

trees may be employed to perpetuate meander corners, and 
when so used, must be witnessed the same as meander posts. 

Section 453.— GOVERNMENT LINES AND COR- 
NERS MUST CONTROL.— As has been said before, 
where the corners are estabHshed by the proper officer in 
pursuance of the system of subdivision authorized by law, 
they must be regarded as the true corners which they rep- 
resent, even if it is subsequently found that any post or 
corner is out of line, or that the intervals betw^een posts 
are unequal or incorrect; for no party has a right to cor- 
rect such errors except the general Government, and it 
possesses the power only while the title to the lands affected 
by the change is yet in the United States. After the lands 
have passed into the hands of private parties, the Govern- 
ment lines and corners, as marked in the field, must control 
in determining the boundaries of all legal subdivisions, 
when they can be found and identified ; and when they are 
missing, recourse must be had to the official plats and field 
notes of the Government surveyor. 

Section 454.— RESTORING LOST CORNERS.— When 

extinct lines or corners of the public lands are required to 
be reestablished, a County Surveyor or other competent per- 
son is usually employed by private parties. It is not the 
province of the General Land Office to direct the operations 
of any but Government surveyors engaged in the public 
service ; yet obliterated boundaries must be restored in con- 
formity with the laws and regulations under which they 
were originally established. Extinct lines or corners must 
be restored to the exact locality they originally occupied, if 
possible. Resort should first be had to the marks in the 
field. The surveyor should first seek to identify the missing 
corner on the ground, by the aid of the bearing trees or wit- 
ness mounds, line trees, etc., described in the original field 



BUSINESS CONTRACTS AWi^ LEGAL OBLIGATIONS. 263 

notes. When two or more witness trees or mounds can be 
found, they afford the best means for restoring a missing 
corner to its original position that can be had. If the cor- 
ner cannot be identified in this manner, clear and unques- 
tionable testimony as to the locality it originally occupied 
should be taken, if suck testimony be obtainable. This 
testimony must be had from the lips of old settlers, resi- 
dents of the neighborhood, who may be able to point out 
from their personal observation and recollection the posi- 
tion of a stake or mound set by the original surveyor at 
the time the line was run. Axmen, or chainmen, who were 
with the Government surveyor, may be sworn and their 
affidavits taken as to the original location of missing cor- 
ners, and generally, as to their knowledge of the place 
where the Government surveyor located the line which the 
private surveyor is endeavoring to retrace. But this sort of 
evidence is always more or less unreliable, and subject to 
abuse ; and, after all, the monuments placed on the ground 
by the Creator, wdiich neither time nor man can efface or 
change — mountains, rivers, the ocean bluff, ponds and lakes, 
and other prominent features of the earth's surface — these, 
when they correspond with the field notes of the original 
survey, form the best evidence of the true location of the 
lines and corners established by the Government surveyor. 

Section 455.— PROPORTIONATE MEASURE- 

MENTS. — In retracing lines, it frequently happens that the 
measurements do not agree with those stated in the Gov- 
ernment field notes. This discrepancy generally arises 
from a difference in the length of the respective chains 
used, or a want* of proper care in straightening and level- 
ing the chain, or in sticking the pins, on the part of one 
set of chainmen or the other, but is sometimes owing to an 
error in tallying committed by the Government chainman. 
When these differences in measurement occur, the Countv 



.264 BUSINESS .LAWS FOR BUSINESS MEN. 

Surveyor must in all cases establish his corners at intervals 
proportionate to those given in the Government field notes. 
This rule must be observed even if the original interval 
be one or more tallie^s too many or too few. 

Section 456.— INSTRUCTIONS FROM THE GEN- 
ERAL LAND OFFICE.— The Department of the Interior, 
through the General Land Office, has from time to time 
issued circular letters of instruction, stating the rules estab- 
lished by law which must be followed by County Surveyors 
and others in retracing the lines of Government surveys 
and relocating missing corners. From these letters of in- 
struction the following rules have been copied, and are 
recommended to the careful study of the owners of land 
the boundaries of which are in controversy : — 

(i) All corners of the public surveys established by the 
:Government surveyors must stand as the true corners they 
■were intended to represent, and the length of lines stated 
in the field notes of the origin-al survey must be considered 
as the true lengths thereof. 

- (2) Missing corners should be restored to the exact 
position they originally occupied. 

(3) All lines subdividing a Section must be straight 
lines running through the Section from the corner in one 
boundary to its corresponding corner in the opposite bound- 
ary of said Section. 

(4) Section and quarter Section corners as established 
by the Government survey, must, by law of Congress, stand 
as the true corners. 

(5) Missing corners must be reestablished at the iden- 
tical point where the original posts were planted by the 
United States Deputy Surveyors. 

(6) The legal presumption is, in the absence of any 
evidence to the contrary, that lost Section and quarter 
Section posts were originally established at the distance 
indicated in the field notes. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 265 

(7) Half quarter Section corners must be established 
equidistant from the Section and quarter Section posts. 

(8) To divide a Section into quarters, a right line should 
be run from the quarter Section post in one Section line to 
the corresponding quarter Section post in the opposite Sec- 
tion line, even though one or more of these posts may have 
been established nearer to one Section corner than the other, 
thereby giving to one quarter Section more than 160 acres, 
and to another less than i6o acres. 

(9) It is the duty of the surveyor to reestablish missing 
posts in the exact locality where they were originally 
placed in the Government survey. The proof of locality 
first sought to be obtained should be the witness trees, 
or any other means of identification contained in the field 
notes, and next, clear and unquestionable testimony of any 
kind. If no bearing trees, or other evidence in the field 
notes or elsewhere, exist, by which the locality of the miss- 
ing posts can be identified or determined in the field, then 
the legal presumption is that the missing Section or quarter 
Section corners were originally established in conformity 
with the distances expressed in the field notes, and the sur- 
veyor should so reestablish them. 

(10) Extinct quarter Section corners, except on frac- 
tional Section lines, when they cannot be identified, should 
be reestablished equidistant between the Section corners, 
in a right line between the nearest noted ''line trees" each 
side of it, if there are any; but if none are found, then in 
a right line between the Section corners. Extinct quarter 
Section posts, on Section lines which close on the North 
and West boundaries of Townships, should be reestab- 
lished, according to the original measurement thereof, at 
40 chains from the last interior Section corner. 

(11) Extinct Section corners may be reestablished by 
running a right line between the nearest noted "line tree" 



266 BUSINESS LAWS FOR BUSINESS MEN. 

North and South and East and West of the lost corner, 
if there be any such trees within the distance of the nearest 
quarter Section corners ; but if no ''Hne tree" be found, then 
between the nearest quarter Section or Section corners, and 
at the point of intersection of the two Hues thus run, estab- 
lish the Section corner, with new bearings to the nearest 
and most desirable objects. 

(12) The quarter mile posts are not established in Gov- 
ernment surveys, but are, by law, understood to be equi- 
distant from the Section and quarter Section corners, and 
should be so established by the County Surveyor. 

(13) It may be remarked, that where the measurement 
of any Section line by the County Surveyor does not cor- 
respond with the original measurement recorded in the 
field notes, lost corners should be reestablished at pro- 
portionate distances from each other between the known 
corners. 

Section 457.— MANUAL OF UNITED STATES SUR- 
VEYING. — If any reader of this book desires to acquire 
more extensive information of the system of United States 
surveying, and of the rules of the General Land Office 
regulating the retracing of Government lines and the re- 
locating of lost or missing corners, he is recommended to 
obtain a copy of the ''Manual of United States Surveying," 
by J. H. Hawes, published by J. B. Lippincott Company, 
Philadelphia. It is a clear and comprehensive treatment 
of the subject, giving very full and useful information upon 
all matters connected with surveying. 

Section 458.— WHERE SURVEYOR SHOULD 
START. — To retrace a line, a surveyor should start from 
some known corner called for by the field notes of the 
original survey. He should start from the nearest known 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 267 

corner. When he has found such a corner, and has iden- 
tified it by descriptions in the field notes, or by the testimony 
of old residents in the neighborhood, it will make no dif- 
ference whether the corner is on the Township line, or in 
a Township north or south of the line ; for if it is a corner 
established by the original surveyor, when locating the 
Township line, or subsequently in subdividing a Town- 
ship, and is the nearest known corner to the point which 
the private surveyor is endeavoring to retrace or relocate, 
it should be his starting point in making his survey. 

Section 459.— MONUMENTS CONTROL COURSES 
AND DISTANCES.— It is a rule of surveying, always to be 
applied to the retracing of Government lines and the relo- 
cating of Government corners, that monuments, natural 
or artificial, control courses and distances. Consequently, 
whether the courses and distances correspond with the 
field notes or not, if the monuments called for by the field 
notes are found on the ground, they must control. Tt is 
only where no monuments, natural or artificial, can be 
found, that the courses and distances will control. 

Section 460.— COMPLETION OF UNITED STATES 
SURVEY. — The Government survey of the public lands 
is made by running and marking the lines of the Town- 
ship and Sections, and by marking the corners of the 
Township, Sections, and quarter Sections. It is not nec- 
essary that a whole Township be surveyed at one time, 
and often different parts of a Township are surveyed at 
dififerent times. But no survey of any part is complete 
until the lines and corners about that part are run and 
established as required by the statute. Even after a prin- 
cipal meridian and base line have been established, and the 
exterior lines of the Township have been surveyed, neither 
the Sections nor their subdivisions can be said to have 



268 BUSINESS LAWS FOR BUSINESS MEN. 

any existence until the Township is subdivided into Sec- 
tions and quarter Sections by an approved survey. The 
lines are not ascertained by the survey, but they are created 
by it. 

Section 461.— APPLICATION TO PURCHASE 
SCHOOL LAND.— The law of California does not con- 
template a sale of school land by the State until the title 
to the i6th and 36th Sections has vested in the State, and 
the title to these Sections does not vest in the State until 
the plat of the survey is approved by the United States 
Surveyor-General. An application to purchase a i6th or 
36th Section of land, filed before the plat of the survey of 
the Township is approved by the United States Surveyor- 
General, is unauthorized and void. 

Spaulding's Table for Measurement of Logs 

Section 461a.— LEGAL STANDARD OF LOG MEAS- 
UREMENT.— The State has by law adopted the table 
known as Spaulding's Table for the Measurement of Logs, 
as the legal standard of measurement in California. The 
law passed by the Legislature (Statutes of 1878) reads as 
follows : "There shall be but one standard for the measure- 
ment of logs throughout the State. The following table, 
known as Spaulding's Table for the Measurement of Logs, 
is hereby made the standard and table for the measurement 
of logs throughout the State. For the measurement of logs 
of any greater length than indicated in the table set forth 
in Section 2 of this Act, the computation shall be made 
in accordance with table. All logs shall be measured at the 
small end and inside the bark, and the contents computed 
according to table. Allowance shall be made for rot, shake, 
or other defect in logs measured by this scale and under 
the provisions of this Act, so as to make the survey express 
the actual quantity of merchantable lumber in each log." 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 



269 



The Spaulding Table for the Aleasuremeiit of Logs is as 
follows : — 



Length 
IN Feet 



12 
13 
14 
15 
16 

17 
18 

19 
20 
21 
22 

23 
24 



Diam. 



Diam. 
II 



38 
41 

44 
47 
50 
53 
57 
60 

63 
66 

69 
72 
76 



47 
51 
55 
59 
63 
67 
70 

74 
78 
82 
86 
90 
94 



Diam. 

12 



Diam. Diam 

13 i 14 



58 
62 
67 
72 

77 
82 

87 
91 
96 

lOI 

106 
III 
116 



71 
76 
82 
88 

94| 
100 
106 
112 
118 
124; 
130 
136 
142 



86 

93 
100 
107 
114 
121 
129 
136 
143 
150 
157 
164 
172 



Diam. 


Diam. 


15 
103 


16 


121 


III 


131 


120 


141 


128 


151 


137 


161 


145 


171 


154 


181 


163 


191 


171 


201 


180 


211 


188 


221 


197 


231 


206 


242 



Diam. Diam. Diam. Diam. 

17 18 I 19 j 20 



141 

152 

164 
176 
188 
199 
211 
223 

235 
246 

258 
270 
282 



162' 184 

i75| 199 

189! 214 

202 230 

2161 245 

229 260 

243 276 

256 291 

270: 306 



283 
297 
310 
324 



322 

337 
352 
368 



207 
224 
241 

258 
276 

293 
310 

327 
345 
362 

379 
396 
414 



Lengt 


H [Diam. 


Diam. 


Diam. 


Diam. Diam. 


Diam. 


Diam. 


Diam. Diam. 


Diam. Diam. 


IN Fee 


T 21 


22 


23 


24 j 25 


26 


27 


28 


29 


30 31 


12, . . 


. 231 


256 


282 


309 337 


366 


396 


427 


459 


492j 526 


13 •• 


• 250 


277 


305 


3341 365 


396 


429 


462 


497 


533 


569 


14... 


.1 269 


298 


329 


36oi 393 


427 


462 


498 


535 


574 


613 


15... 


. 288 


320 


352 


3871 421 


457 


495 


533 


573 


615' 657 


16.., 


•! 308 


341 


376 


412 449 


488 


528 


569 


612 


656 701 


17... 


• 327 


362 


399 


437I 477 


518 


561 


604 


650 


697 745 


18... 


• 346 


384 


423 


463 505 


549 


594 


640 


688 


738 789 


19... 


. 365 


405 


446 


489 533 


579 


627 


676 


726 


779 832 


20. . . 


• 385 


426 


470 


515 561 


610 


660 


711 


765 


820 876 


21 . . . 


• 404 


448 


493 


540 589 


640 


693 


747 


803 


861 920 


22. . . 


• 423 


469 


517 


566 617 


671 


726 


782 


841 


902 


964 


23... 


• 442 


490 


• 540 


591 645 


701 


759 


818 


879 


943 


1008 


24; . . 


. 462 


512 


564 


618 674 


732 


792 


854 


918 


984 1052 



270 



BUSINESS LAWS FOR BUSINESS MEN. 



Lexgt 


H Diam. Diam. 


Diam . Diam . i Diam. 


Diam. 


Diam. 


Diam. 


Diam. 


Diam. 


IN Fee 


T 32 33 


34 I 35 


36 


37 


38 


39 


40 


41 


12. . . 


• 561 597 


1 
634' 673 


713 


755 


798 


843 


889 


936 


I3--. 


. 607 646 


686 729I 772; 817 


864 


913 


963 


IOI4 


14... 


. 654 696 


739 785 


831 880 


931 


983 


1037 


1092 


15.- 


. 701 746 


792, 841 


8911 943 


997 


1053 


nil 


II70 


16.. 


• 748 796 


845 897 


95o|ioo6 


1064 


II24 


I185 


1248 


17.. 


• 794 845 


898 9531010J1069 


1130 


1 194 


1259 


1326 


18.. 


. 841 


895 


951 1009 1069 1132 


1 197 


1264 


1333 


1404 


19.. 


. ! 888 


945 


1003 1065 1128 1195 


1263 


1334 


1407 


1482 


20. . 


• 935 


995 


1056 1121 1188 1258 


1330 


1405 


I481 


1560 


21 . . 


. ; 981 


1044 


1109 1177 1247 1321 


1397 


1475 


1555 


1638 


22. . 


. I1028 


1094 


1162 1233 1307 1384 


1463 


1545 


1629 


I716 


23- • 


• '1075 


1 144 


1215 1289 1366 1447 


1529 


1615 


1703 


1794 


24. . 


. 1122 


1 194 


1268 1346 1426 1510 


1596 


1686 


1778 


1872 



Lengt] 


a. Diam. 


Diam. 


Diam. 1 Diam. Diam. Diam. 


Diam.. 


Diam. 


Diam. 


Diam. 


IN Fee 


T 42 


43 


44 1 45 46 


47 


48 


49 


50 


51 


12. . . 


. 984 


1033 1086 II34 I186 


1239 


1293 


1348 


1404 


I461 


13. . . 


. 1066,11191176,122812841342 


1400 


1460 


I52I 


1582 


14. . . 


. II48 


1205 1267 1323 1383 1445 


1508 


1572 


1638 


1704 


15... 


. I23OI29I 


1357 I4I7 


1482 1548 


I616 


1685 


1755 


1826 


16. . 


• I312 1377 


1448 I512 


I581 1652 


1724 


1797 


1872 


1948 


17. . 


• I3941463 


15381606 


1680^1755 


I83I 


1909 


1989 


2069 


18. . 


• I4761549 


1629 I7OI 


1779 1858 


1939 


2022 


2106 


219I 


19.. 


• I55811635 


1719,1795 


1877:1961 


2047 


2134 


2223 


2313 


20. . 


. 1640 172 I 


18IO 1890 


19762065 


2155 


2246 


2340 


2435 


21 . . 


. 1722 1807 


1900 1984 


2075 2168 


2262 


2385 


2457 


2556 


22. . 


. 1804 1893 I99I 2079 


2I74!227I 


2370 


2470 


2574 


2678 


23-- 


. 1886 1979 2081 2173 


227312374 


2478 


2582 


2691 


2800 


24.. 


. 1968 2066 2172 2268 


2372I2478 


2586 


2696 


2808 


2922 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 



271 



IvENGTH 


Diam. Diam. Diam. Diam. 


Diam. Diam. 


Diam. 


Diam. 


Diam. 


Diam. 


IN Feet 


52 


53 54 55 


56 


57 


58 


59 


60 


61 


12. 




T519 


1578 1638 1700 


1763 


1827 


1893 


i960 


2028 


2098 


13- 




1645 1709 1774 184I 


1909; 1979 


2050 


2123 


2197 


2272 


14- 


. • 


1772 184I I9II 1983 


2056 213I 


2208 


2286 


2366 


2447 


15- 




1898 1972 2047 2125 


22032283 


2366 


2450 


2535 


2622 


I6. 


• • 


2025I2IO4 2184 2266 


23502436 


2524 


2613 


2704 


2797 


17- 




215I 223523202408 


2497 2588 


2681 


2776 


2873 


2972 


l8. 




22781236724572550 


2644 2740 


2839 


2940 


3042 


3147 


19 




2405124982593 2691 


2791 2892 


2997 


3103 


32II 


3321 


20. 




2531 263027302833 


293813045 


3155 


3266 


33^0 


3496 


21 . 




2657 2761 2866 2974 


30853197 


3312 


3429 


3549 


3671 


22. 




2784 2893 3003 31 16 


3232 3349 


3470 


3592 


3718 


3846 


23- 




29II 302431393258 


33793501 


3628 


3756 


3887 


4021 


24- 




3038;3i56!3276 3400 


35263654 


3786 


3920 


4056 


4196 



Length Diam. jDiam. Diam. Diam. Diam. Diam. Diam, Dlam.'Diam, 

63 I 64 65 66 67 68 '^^ ! - 



Lengi 

IN FE) 


:h Diam. 

<T [ 62 


12. . 


..I2169 


13- • 


• -12349 


14. . 


••2530 


15- • 
16... 


. . 27 1 1 
.. .2892 


17.. 


..3072 


18. . 


•• 3253 


19.. 
20. . 


• • 3434 
•• 3615 


21 . . 


•3795 


22. . 


• ■ 3976 


23 •• 

24 •• 


• -4157 
••'4338 



69 



22411 
2427 

2614 
2801 
2988 

3174 
3361 
3548 

3735 
3921 
4108 

4295 
4482 



23152390 
25072589 
27002789 
28932987 
30863186 
32793385 
34723585 
36653784 

3858 3983 
4051 4182 
42444381 
4437 4580 
46304780 



2467 
2672 
2878 
3083 
3289 

3494 
3700 
3906 
4111 
4316 
4522; 
4728 
4934' 



2545 
2757 
2969 
3181 

3393 
3605 

3817 
4029 
4241 

4453 
4665 

4877 
5090 



2625 2706^ 
28432931' 
30623157 
32813382 
3500 3608 
37183833 
3937 4059 
41564284 
43754510 

4593 4735 
4812 4961 
5031 5186 
525015412! 



2789 
3021 

3253 
3486 

3718 
3951 
4183 

4415 
4648 
4880 
5113 
5345 
5578 



Diam.. Diam. 

71 ' 72 



2874 
3II3 

3353 
3592 
3832 
4071 

4311 
4550 
4790 
5029 
5269 
5508 
5748 



2960 
3206 

3453 
3700 

3946 
4193 
4440 
4686 

4933 
5180 
5426 

5673 
5920 



272 



BUSINESS LAWS FOR BUSINESS MEN. 



Iiengtb 
in Feet 



12 
13 
14 
15 
16 

17 
18 

19 
20 



Diam. 

73 



I i 

Diam. Diam.;Diam. Diam. Diam, 



74 



304713135 
33013396 

35553657 
38093919 
4062 4180 
4316I4441I 
4570:4702^ 
482414964I 
5078I5225I 



75 



76 



3224 
3492 
3761 
4030 
4298 

4567 
4836 

5104 
5372 



'3314 
3590 
3866 
4142 
4418 
4694 
4970 
5246 
5522 



77 



3405 3497 

36883788 



Diam. 

79 



Diam. 

80 



Diam. Diam. Diam.. 

81 ' 82 83 



3972 
4256 
4540 
4823 
5107 
5391 
5675 



4o80[ 

437 1 1 
46631 

4954' 

5245! 
5537| 
5829I 



Diam.. 

84 



3590 3684 3779 3874 3970 4067 
38893991 4094 4196 4301 4406 
4188 4298 4408 4519 4631 4745 
4487J4605 4723 4842 4962I5084 
4786I4912 5038 5165 5293 5423 
5085 52i9'5353 5488 5624 5762 
5385 5526 5668 581 1 5955 6101 
5684I5833 5983 6133 6282 6440 
598316140:6298:6456 66 1616778 



Length Diam. 

in Feet 85 



Diam. 



Diam. Diam. 

87 



Diam. 



Diam. Diami. 
90 91 



Diam..: Diam. 

92 ' 93 



Diam, 

94 



Diam. j Diam. 

95 I 96 



12 
13 
14 
15 
16 

17 
18 

19 
20 



4165 
4512 

,4859 
5206 

5553 
:59oo 
|6247 

6594 
16941 



4264 
4619 
4974 
5330 
5685 
6040 
6396 
6751 



4364 
4727 
5091 
5455 
5818 
6182 
6546 
6909 



4465 
4837 
5209 

5581 



4566 
4946 
5327 
5707 



59536088 
63256468 
6697 6849 
7069 7229 
7106 7273 744i{76io 



46684771 
50575168 
5446I5566 

58355964 
62246361 
66136759 
70027156 

739i'7554 
77807951 



4875 
5281 

5687 
6094 
6500 
6906 
7312 
7719 
8125 



4980 5085 
53955508 
5810:5932 
622516356 
66406780 

705517203 
74707627 
7885I8051 
83008475 



51925300 
56245741 
60576183 
6490,6625 
6922 7066 
73557508 
7788,7950 
822o;839i 

8653'8833 



Section 461b.— EXPLANATION OF TABLE.— The 

length of any log in feet will be found in the left-hand 
column of the table, and the diameter at the top of the page. 

To find the number of feet of square-edged boards which 
a log will produce wdien sawed : Take the length of feet in 
left-hand column of the table, and its diameter in inches at 
the top of the page ; trace the tw^o columns of figures until 
they meet, and you have the required amount. 

(A log w^hich is i8 feet long and 21 inches in diameter 
gives at the right of the length, and directly under the diam- 
eter, 346 feet; and one 23 feet long and 18 inches in diam- 
eter, gives 310 feet.) 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 273 

Logs longer than are given in this table can be easily 
measured by doubling any given length ; for example, to 
find the number of feet, board measure, contained in a log 
28 feet long by 19 inches in diameter, double the amount 
contained in a log 14 feet long, 19 inches in diameter, and 
you have the answer — 428 feet. For a log 42 feet long, 
19 inches diameter, multiply the amount contained in the 
table in a log 14 feet long by 3, and you have the amount; 
and so on to any length or size. 

Each sized log has been scaled so as to make all that 
can be practically sawed out of it, if economically sawed, 
each log to be measured at the top or small end, inside of 
the bark, and if not round, to be measured two ways, at 
right angles, and the difference taken for the diameter. 
Where there are any known defects, the amount deducted 
should be agreed upon by the buyer and seller, and no 
fractions of an inch to be taken into the measurement. 

Division Fences 

Section 462.— FENCES ON THE LINE.— A lawyer in 
active practice in a rural district has considerable of his 
time taken up with investigation and discussion of con- 
troversies growing out of line fences, and these disputes 
are the occasion of bitter and expensive lawsuits between 
neighbors in almost every part of California. The law of 
the State, referring to division fences, is condensed in the 
Sections which follow : — 

Section 463.— MUTUAL OBLIGATIONS OF OWN- 
ERS OF LAND.— The law of California provides, that 
OAvners of lands which join are mutually bound equally 
to maintain the fences between them, unless one of them 
chooses to let his land lie without fencing; and if one of 
them has not built a fence which with other fences serves 
to completely enclose his own land, and afterwards does 
so, and encloses his land, he must refund to the jther 
18 



274 busine:ss laws i^or busine:ss men. 

owner a just proportion of the value at that time of any 
division fence made by him. This apphes to a case where 
a fence had been built by one person on the line of his land, 
and the person owning the land adjoining makes an en- 
closure on the opposite side of such fence, so that it then 
answers the purpose of enclosing his ground also. 
Civil Code, Section 841. 

Section 464.— GENERAL FENCE LAV/.— The law 
stated in the last Section is general and in force throughout 
the State, with the exception of certain counties, for which 
special laws have been passed by the Legislature. The 
fence law for each county in the State is given in following 
Sections. 

Section 465.— ALAMEDA COUNTY.— LAWFUL 
FENCES. — In the county of Alameda, lawful fences are as 
follows : — 

Wire Fence. — Must be made of posts not less than twelve 
inches in circumference, set in the ground not less than 
eighteen inches, and not more than eight feet apart, not 
less than three horizontal wires, each one-fourth of an 
inch in diameter; the first one eighteen inches from the 
ground, the other two above this one at intervals of one 
foot between each, all well stretched and securely fastened 
from one post to another, with one rail, slat, pole, or plank, 
of suitable size and strength, securely fastened to the post 
not less than four and a half feet from the ground. 

Post and Rail Fence. — Post and rail fences must be made 
of posts of the same size and at t'he same distance apart, 
and the same depth in the ground as above, with three 
rails, slats, or planks, of suitable size and strength, the 
top one to be four feet and a half from the ground, the 
other two equal distances between the first and the ground ; 
all securely fastened from one post to another, with one 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 275 

rail, slat, pole, or plank, of suitable size and strength, se- 
curely fastened to the post not less than four and a half 
feet from the ground. 

Picket Fence. — Picket fences must be four and a half 
feet high, each picket not less than six inches in circum- 
ference, not more than six inches apart, driven in the 
ground not less than ten inches, all well secured by slats 
or caps. 

Ditch and Pole Fence. — Ditch and pole fences must be 
made of a ditch not less than four feet wide on top, and 
three feet deep, embankment thrown upon the inside of 
the ditch, w^ith substantial posts set in the embankment 
not more than eight feet apart, and a plank, pole, rail, or 
slat securely fastened to the posts, at least five feet high 
from the bottom of the ditch. 

Pole Fence. — A pole fence must be four and a half feet 
high, with stakes not less than three inches in diameter, 
set in the ground not less than eighteen inches, and where 
the stakes are placed seven feet apart, there must be not 
less than six horizontal poles well secured to the stakes ; 
if the stakes are six feet apart, five poles ; if the stakes 
are three or four feet apart, four poles ; if the stakes are 
two feet apart, three poles, with stakes not less than two 
inches in diameter. This is a lawful fence so long as the 
stakes and poles are securely fastened and in a fair state 
of preservation. 

Hedge Fence. — Hedge fence must be considered lawful 
when, by reliable evidence, it shall be proved equal in 
strength, and as well suited to the protection of enclosed 
lands, as any one of the fences described in other subdi- 
visions of this Section. 

Brush Fence. — Brush fence must be four and a half feet 
high, and at least twelve inches wade, with stakes not less 
than two inches in diameter, set in the ground not less 
than eighteen inches, one on each side, every third foot 
tied together at the top, wiljji one horizontal pole tied to 
the outside stake five feet from the ground. 



276 BUSINESS LAWS FOR BUSINESS MEN. 

Other Fences As Strong-. — The law also declares, that 
any fence, which by reliable evidence, shall be shown to 
be as strong, substantial, and as well suited to the pro- 
tection of enclosures as either of the above described, shall 
be a lawful fence in the county of Alameda, 

Section 466.— ALAMEDA COUNTY.— USING AN- 
OTHER'S FENCE FOR ENCLOSURE.— When a fence 
has been erected by any person on the line of his land, 
and the person ow^ning the land adjoining builds a fence 
on the opposite side, so that such fence may answer the 
purpose of enclosing his ground also, he makes himself 
liable to the owner of the fence already erected. 

Section 467.— ALAMEDA COUNTY.— ONE-HALF 
THE VALUE MUST BE PAID.— The owner whose 
fence is already erected, and w^hich serves to enclose on 
one or more sides the land of another who subsequently 
builds a fence which completes the enclosure, is entitled 
to receive from him one-half the value of so much of the 
fence already erected as serves for a partition fence be- 
tween them. 

Section 468.— ALAMEDA COUNTY.— LIEN FOR 
ONE-HALF THE VALUE OF FENCE.— If the party 
liable for one-half the value of a fence neglects or refuses 
to pay, the land so enclosed becomes liable for the amount, 
and the value of one-half of the fence becomes and re- 
mains a lien upon the land and draws interest at the rate 
of 15 per cent per annum until paid. Notice of this lien 
must be filed in the office of the County Recorder of the 
county, in the same manner as mechanics' liens are filed. 
The manner of filing of mechanics' liens has already been 
.stated under that head. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 277 

Section 469.— ALAMEDA COUNTY.— PARTITION 
FENCES. — When two or more persons own land adjoin- 
ing, which is enclosed by one fence, and it becomes nec- 
essary for the protection of the rights and interests of 
one party that a partition fence should be made between 
them, the other owner, when notified of such fact, must 
proceed to erect one-half of such partition fence; said 
fence to be erected on, or as near as practicable, the line 
of said land ; and if, after six months' notice given, the 
party notified persists in refusing to erect one-half the 
fence, the other party may build the entire fence, and collect 
by law one-half of the cost of such fence from the other 
party, and he is entitled to a lien upon the land thus par- 
titioned. 

Section 470.— ALAMEDA COUNTY.— FENCES ON 
THE LINE. — The law^ provides that all partition fences 
separating adjoining enclosures shall stand upon the line; 
and if any person erects a partition fence and refuses to 
place it on the line, or after it has been erected refuses to 
move it to the line, he is liable for one-half the cost of its 
removal and erection in the right place. 

Section 471.— ALAMEDA COUNTY.— REPAIR OF 
PARTITION FENCES.— Adjoining land owners are 
bound to keep up and maintain in good repair all partition 
fences between them, and must pay the costs in equal 
shares, so long as both parties continue to occupy or im- 
prove the land. Partition fences dividing lands occupied 
on both sides must be maintained throughout the year, 
each party keeping in repair the portion constructed by 
him or paid for by him, or lawfully belonging to him. If 
either owner fails to keep his part of the fence in repair, 
the other may give him three days' notice that he w^ill 
call upon three disinterested householders, at a certain hour 
on the day named in the notice, to examine such fence. 



278 BUSINESS LAWS FOR BUSINESS ME:n. 

and if they deem it insufficient, to assess the amount nec- 
essary to make it sufficient. If, within fifteen days there- 
after, the party to whom notice has been given fails to 
repair the fence, the party giving the notice may do so ; 
and he will have a right of action against the other for 
the amount assessed by the three householders, with 25 
per cent damages. Upon the trial of the case, if it appears 
that the assessment by the householders was not fair, 
the court or jury will determine the amount of damages. 

Section 472.— ALAMEDA COUNTY.— HEIGHT OF 
DIVISION FENCES AND PARTITION WALLS IN 
CITIES AND TOWNS.— The Legislature has passed an 
Act regulating the height of division fences and parti- 
tion walls in cities and towns, which makes it unlawful 
for any person to construct or maintain, in any city or town 
in California, any fence or partition wall more than ten 
feet high, without first obtaining a permit to do so from 
the city council of the town, or a permit from the Board 
of Supervisors of San Francisco if the fence or partition 
wall is to be erected or maintained there. No permit to 
erect or maintain any fence or division partition wall,- in 
any city or town in this State, where the fence or parti- 
tion wall has a greater height than ten feet, can be granted 
to any one unless the written consent of the person own- 
ing and possessing the adjoining premises is first obtained 
and produced. There is one exception, and that is where 
the fence or wall is erected around a public garden, or 
place of public resort, wdiere an admission fee is charged, 
and in these cases the consent of the adjacent owner is 
not required. It is a misdemeanor to violate this law, with 
a punishment by a fine of not less than $50 nor more than 
$500, or by imprisonment in the County Jail. 

Statutes of 1855, page 154; Statutes of i860, page 
141 ; Statutes of 1885, page 45. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 279 

Section 473.— ALPINE COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law of Alpine 
County is the same as in Alameda. See Sections 465, 466, 
467, 468, 469, 470, 471, 472. 

Section 474.— AMADOR COUNTY.— ERECTION OF 
PARTITION FENCES.— The county of Amador is one 
of the counties for which special laws have been passed 
regulating fences. The Legislature in 1876 passed a law, 
which is still the fence law of Amador County, and which 
provides that when two or more persons own land ad- 
joining in Amador County, enclosed by one fence, and it 
becomes necessary for the protection of the rights and 
interests of one party that a partition fence should be made 
between them, the other party, when notified, must proceed 
to build one-half of such partition fence. The fence must 
be erected on the line, or as near as practicable to the line, 
of the land. If, after notice given in writing, the partv 
notified fails to build his half of the fence within six months, 
the party giving the notice may proceed to build the entire 
fence, and can collect by law one-half of the cost of such 
fence from the other party. He will also be entitled to a 
lien upon the land for the value of the half of the fence 
which the other party should have built. Notice of lien 
must be filed in the office of the County Recorder, and the 
amount due will draw interest at the rate of fifteen per cent 
per annum until paid. 

Section 475.— AMADOR COUNTY.— LAWFUL DI- 
VISION FENCES.— Lawful division fences in Amador 
County are as follows: (i) If made of stone, four feet 
high, three feet base, and one foot thick on the top. 
(2) If a worm fence, the rails must be well laid, and at 
least five feet high. (3) If made of posts and boards, 
the posts must be set well in the ground, not less than 
eighteen inches, and not wider apart than eight feet. If 



280 BUSINESS LAWS I^OR BUSINESS MEN. 

intended to turn all stock, it must be at least five six- 
inch boards or four eight-inch boards high, or four boards 
high with a ditch embankment equal to one board, or 
four six-inch boards high with a wire on top, the boards 
to be six inches wide and one inch thick, the top board or 
wire to be four and a half feet from the ground, the spaces 
well divided, and the boards securely nailed to the posts. 
If intended by mutual agreement in writing between ad- 
joining owners, to be a lawful fence to turn only neat cat- 
tle, horses, and mules, a three-board fence will be sufficient, 
the bottom board to be two feet from the ground. (4) If 
made of pickets, posts, and rails, and a ditch or ditches, 
the fence must be strong and secure. (5) If made of wire, 
posts, and poles, ditch, pickets, hedge, brush, or any other 
materials, the fence, to be lawful, must be equal in strength 
and capacity to turn stock as the fence made of posts and 
boards. 

Every enclosure in Amador County is deemed a lawful 
fence which is four and a half feet high, if made of stone; 
and if made of rails, five and a half feet high ; if made upon 
the embankment of a ditch three feet above the bottom 
of the ditch, the fence must be two feet high, and be 
substantial and reasonably strong, and made so close that 
stock cannot get their heads through it, and if made to 
turn small stock must be sufficiently tight to keep such 
stock out. A hedge fence is a lawful fence if five feet 
high and sufficiently close to turn stock. All posts used 
must be at least twelve inches in circumference, set at 
least eighteen inches in the ground, and must be replaced 
as often as the fence becomes decayed. 

Section 476.— AMADOR COUNTY.— DUTY OF 
OWNERS. — Each adjoining land owner must construct 
and keep in repair a just proportion of the line fence be- 
tween their respective tracts of land, unless the owner of 
one or both tracts chooses to let the land lie unenclosed. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 281 

Section 477.— AMADOR COUNTY.— LIABILITY OF 
ADJOINING OWNERS.— When one of adjoining OAvners 
has allowed his land to lie unenclosed, and afterwards en- 
closes it, he will be indebted to the other adjoining owner 
one-half the value of any division fence owned by him, 
used in forming such enclosure ; and each must thereafter 
keep one-half of the fence in repair. 

Section 478.— AMADOR COUNTY.— VIEWERS TO 
DECIDE DISAGREEMENT.— In Amador County, the 
law is, if adjoining proprietors cannot agree as to the 
proportion or the particular part of a division fence to 
be made, maintained, or kept in repair by each, then either 
party may apply, on five days' notice, to a Justice of the 
Peace of the Township, or if there is none, then to the 
Superior Judge, for the appointment of three viewers. 
These viewers have a right to examine witnesses on oath, 
and view the premises, and must determine, if the fence 
is owned by one, how much the other shall pay as his 
proportion of the value; or, if the fence is not already built, 
which part shall be built and kept in repair by each. The 
determination of the viewers must be in writing, and 
signed by them, and must be filed in the office of the 
County Clerk, and it will be conclusive upon the parties. 
AX'hatever value is fixed by the viewers as the amount 
which one party must pay the other, it must be paid within 
thirty days after notice of the decision of the viewers, and 
if not paid, may be recovered by a suit. The viewers are 
entitled to a fee of three dollars each, one-half to be paid 
by each owner. 

Section 479.— AMADOR COUNTY.— TRESPASSES 
BY ANIMALS. — The owner of any premises in Amador 
County enclosed by a lawful fence may recover from the 
owner of any trespassing horses, mules, jacks, jennies, 
hogs, sheep, goats, or neat cattle, breaking into his grounds. 



282 busine:ss laws for business mkn. 

all damages sustained by him; and if the trespass is re- 
peated, by neglect of the owner of the stock, the owner 
of the land is entitled to double the damages sustained 
by the trespass. 

Statutes of 1850, page 131 ; Statutes of 1876, page 
175- 

Section 480.— BUTTE COUNTY.— FENCE LAW 
SAME AS IN AMADOR.— The fence law for Butte 
County is the same as in Amador County. See Sections 
474. 475. 476, 477. 478, 479- 

Section 481.— CALAVERAS COUNTY.— FENCE 
LAW SAME AS IN ALAMEDA.— The fence law for 
Calaveras County is the same as in Alameda County. See 
Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Section 482.— COLUSA COUNTY.— LAWFUL 

FENCES. — In the county of Colusa, every enclosure is 
a lawful fence which is four and a half feet high, if made 
of stone, and if it be made of rails, five and a half feet 
high; if the fence be post and rail fence, or a picket fence, 
it must be constructed of posts of reasonable size and 
strength, firmly set in the ground, not more than twelve 
feet apart; and not more than eight feet apart if it be a 
board fence; the rails, boards, or pickets, to be of reason- 
able size and strength, securely fastened to the post, to 
the height of four and a half feet, and reasonably close ; 
if a picket fence, the pickets, also, to be strongly nailed 
to a rail below and one above, or driven into the ground 
and nailed to a rail above, reasonably close ; if a ditch 
fence, the ditch to be at least two and a half feet deep, 
and three feet wide at the top, the embankment to be 
either on the inside or outside of the enclosure, with a 
rail, board, or picket fence on the embankment, to the 
height of three feet. Any other kind of fence, equivalent 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 283 

in height, quantity, and strength, to the above kind of 
fences, are also lawful fences in Colusa County. 

Section 483.— COLUSA COUNTY.— TRESPASSING 
ANIMALS. — In Colusa County, if any horse, mule, jack, 
jenny, hog, sheep, goat, or any head of neat cattle, breaks 
into any ground enclosed by a lawful fence, the owner 
or manager of such animals is liable to the owner of the 
enclosed premises for all damages sustained by such tres- 
pass ; and if the trespass be repeated, by neglect of the 
owner or manager of the animal, the owner of the prem- 
ises can collect from him double the amount of damages 
sustained, for the second and every subsequent trespass ; 
and the owner of any premises in Colusa County, enclosed 
by a lawful fence, may take up and safely keep, at the 
expense of the owner, any animal or animals trespassing 
on his property; and if such animal or animals shall not 
be taken away by the owner, and the cost paid within ten 
days after being taken up, the owner of the premises may 
post notices and sell them for his costs and damages ; and 
before the owner of the animal or animals can get them 
back, in any case, all damages done by them, and all ex- 
penses of pasturing, keeping, and disposing of them, must 
be paid. 

Section 484.— COLUSA COUNTY.— PARTITION 
FENCE. — The erection of a partition fence in Colusa 
County may be compelled, when either owner of adjoining 
lands uses the land at any time for the pasturage of any 
description of live stock. When it becomes necessary to 
erect a partition f.ence, the party desiring the erection of 
the fence must notify the party adjoining in writing, to 
erect one-half of such fence within six months from the 
date of service of said notice. And in case the party 
notified fails or refuses to build one-half of such partition 
fence within six months, then the party who gave the notice 



284 BUSINESS LAWS FOR BUSINESS MKN. 

may build the whole of the fence, and the land parti- 
tioned off will become liable for one-half of the value of the 
fence ; and the claim for one-half the value is a lien upon the 
land of the other party, and draws interest at the rate of 
15 per cent per annum until paid. Notice of the lien must 
be filed in the office of the County Recorder, the same 
as provided by law for the filing of notices of Mechanics' 
Liens. (The law on Mechanics' Liens is given under that 
head.) The value of one-half of such fence at the time of 
its construction, with the interest, is the amount to which 
the builder of the fence is entitled. 

Section 485.— COLUSA COUNTY.— MANNER OF 
CONSTRUCTING PARTITION FENCES.— In Colusa 
County, except when otherwise agreed between owners of 
land, partition fences dividing lands must be strong, sub- 
stantial, well suited to the protection of enclosures and 
the keeping of stock, and must be maintained throughout 
the year, each party keeping in repair the portion con- 
structed by, owned by, or paid for by him. If either party 
fails to keep in repair the part of the fence which it is 
his duty to maintain, the other may give him three days' 
notice that he will call upon three disinterested house- 
holders, at a certain hour upon the day fixed in the notice, 
to examine such fence, and if they deem it insufficient, to 
assess the amount necessary to make it sufficient. If, 
within fifteen days thereafter, the party to whom such 
notice has been given fails, neglects, or refuses to repair 
such fence, the party giving the notice may do so ; and 
in that case he can sue and recover from the other party 
the amount assessed by the three householders, with 25 
per cent damages added. Upon a suit for the damages, 
if it appears at the trial that the assessment made by the 
householders was not fair, the court or jury will determine 
the amount of the damages. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 285 

Section 486.— COLUSA COUNTY.— LANDS EX- 
EMPTED. — The provisions of the law for the erection of 
partition fences in Colusa County do not apply to lands 
used for agriculture, when such lands are not enclosed by 
a fence. 

Section 487.— COLUSA COUNTY.— LANDS UNDER 
ONE ENCLOSURE. — \Mien two or more persons in 
Colusa County agree to cultivate lands under one en- 
closure, neither of them can place any stock or animals on 
his ground, to the injury or damage of the other; and for 
a violation of this law he will be liable for all damages 
sustained, and after notice given to him, he will be liable 
in double damages for every subsequent violation of the 
law; and in any suit for damages, it will not be necessary 
to prove an express agreement to cultivate under one en- 
closure, but the fact of such cultivation will be sufficient 
evidence of the agreement. 

Statutes of 1859, page 279; Statutes of 1875, page 
207. 

Section 488.— CONTRA COSTA COUNTY.— FENCE 
LAW SAME AS IN AMADOR.— The fence law in 
Contra Costa County is the same as in Amador County. 
See Sections 474, 475, 476, 477, 478, 479. 

Section 489.— DEL NORTE COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA COUNTY.— The fence law for 
Del Norte County is the same as in Alameda County. See 
Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Section 490.— EL DORADO COUNTY.— LAWFUL 

FENCES.— In El Dorado County, the law declares the 
following to be lawful fences : A fence constructed of posts 
of reasonable size and strength, firmly set in the ground, 
not more than twelve feet apart if a rail or picket fence, and 
not more than eight feet apart if a plank fence, the rails 



286 BUSINIvSS LAWS FOR BUSINESS MEN. 

to be not less than four in number and of a reasonable size 
and strength ; and if of plank, to be not less than three in 
number, and of a reasonable size and strength, securely 
fastened to the posts, to the height of four and one-half 
feet, and reasonably close ; if a picket fence, the pickets 
must be of ordinary size and strength, nailed to a rail above 
and one below, or driven in the ground and nailed to a 
rail above, reasonably close, and four and one-half feet 
high ; if a ditch fence, the ditch to be three and one-half 
feet wide at the top and three feet deep, the embankment 
to be on the inside of the enclosure, with a rail, plank, 
or picket fence on the embankment to the height of three 
feet. Any other kinds of fence equivalent in height, qual- 
ity, and strength to the above kind of fences, are also 
declared lawful fences in El Dorado County ; provided, that 
in El Dorado County, it is not necessary that a lawful fence 
shall be sufficient to turn hogs. 

Section 491.— EL DORADO COUNTY.— TRESPASS 
OF ANIMALS. — If any cattle, horses, mules, jacks, jen- 
nies, sheep, or goats break down, over, or through any 
lawful fence in El Dorado County, the owner of such ani- 
mal or animals will be liable for the damages done, and 
must pay double damages for the second or any subsequent 
trespass. 

Section 492.— EL DORADO COUNTY.— OTHER LAW 
SAME AS IN AMADOR.— The additional fence law for El 
Dorado County is the same as in Amador County. See Sec- 
tions 474, 475, 476, 477, 478, 479. 

Statutes of 1885, page 155; Statutes of 1869, page 
584; Statutes of 1875, page 175; Statutes of 
1877, page 765. 

Section 493.— FRESNO COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Fresno 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 287 

Section 494.— GLENN COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Glenn 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 495.— HUMBOLDT COUNTY.— FENCE 
LAW SAME AS IN ALAMEDA.— The fence law for 
Humboldt County is the same as in Alameda County. See 
Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Section 496.— INYO COUNTY.— FENCE LAW SAME 
AS IN ALAMEDA. — The fence law for Inyo County is 
the same as in Alameda County. See Sections 465, 466, 
467, 468, 469, 470, 471, 472. 

Section 497.— KERN COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law fpr Kern 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 498.— KINGS COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Kings 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 499.— LAKE COUNTY.— FENCE LAW 
SAME^ AS IN ALAMEDA.— The fence law for Lake 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 500.— LASSEN COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Lassen 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 501.— LOS ANGELES COUNTY.— FENCE 

LAW SAME AS IN ALAMEDA.— The fence law for Los 



288 BUSINESS LAWS FOR BUSINESS MEN. 

Angeles County is the same as in Alameda County. See 
Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Section 502.— MADERA COUNTY.—FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Madera 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 503.— MARIN COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Marin 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 504.— MARIPOSA COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Mariposa 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 505.— MENDOCINO COUNTY.— FENCE 
LAW SAME AS IN ALAMEDA.— The fence law for 
Mendocino County is the same as in Alameda County. See 
Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Section 506.— MERCED COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Alerced 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 507.— MODOC COUNTY.— L AWFUL 
FENCES. — In IModoc County lawful fences must be as 
follows: (i) If made of stone, three and one-half feet 
high, three feet base, one foot thick on the top, and well 
laid; (2) If a worm fence, the rails must be well laid, and 
at least five feet high ; (3) If made of posts and boards, the 
posts must be set well in the ground, not less than eighteen 
inches, and not further apart than eight feet. If intended 
to turn stock, it shall be constructed of five boards six 



busine:ss contracts and legal obligations. 289 

inches wide and one inch thick, or four such boards with 
a ditch and embankment equal to one board, or four boards 
each eight inches wide and one inch thick, nailed securely 
to the posts, the top of the fence, when constructed, to 
be at least four and one-half feet from the ground, and the 
spaces well divided. If intended as a lawful fence to turn 
only neat cattle, horses, and mules, a three-board fence 
is sufficient, the bottom board to be two feet from the 
ground ; (4) If made of pickets, posts, and rails, or posts 
and poles, ditch or ditches, the fence must be equally strong 
and secure as a fence made as above described; (5) If made 
of wire, posts and poles, ditch, pickets, hedge, brush, or of 
any other material, or any combination of such fences or 
materials, the fence to be lawful must be equal in strength 
and capacity to turn stock as the fences above described 

Section 508.— MODOC COUNTY.— DIVISION 

FENCES. — Each coterminous land owner in Modoc 
County must build and keep in repair a just proportion of 
the line fence between their respective tracts of land, unless 
the owner of one or the owners of both tracts allow the 
land to lie unenclosed. When one of adjoining proprie- 
tors has allowed his land to lie unenclosed, and afterwards 
he encloses it, the law makes him indebted to the owner 
for one-half the value of any division fence used by him in 
forming such enclosure, and each of the adjoining owners 
must "thereafter keep one-half of the fence in repair. 

Section 509.— MODOC COUNTY.— VIEWERS AND 
AWARD. — If adjoining proprietors are unable or unwill- 
ing to agree, and do not agree as to the proportion or par- 
ticular part of a division fence to be m.aintained or kept in 
repair by each respectively, either party may apply, on five 
days' notice, to a Justice of the Peace of the Township, 
or, if there be none, to the Superior Court of the county, 
for the appointment of three viewers. These viewers haA^e 
power to examine witnesses on oath, and must view the 

19 



290 BUSINESS LAWS FOR BUSINESS MEN. 

premises and determine two things: (i) If the fence is 
owned by one proprietor, how much the other shall pay 
as his proportion of the value ; (2) Which part of such 
fence thereafter shall be built and kept in repair by each. 
The determination of the viewers is conclusive as to such 
matters; and if the viewers fix the value of the fence, and 
the proportion which one party is to pay the other, and 
the amount so fixed by them shall remain unpaid for thirty 
days after notice to the party liable to pay it, suit may be 
brought to recover the amount, and the award will be 
conclusive evidence that the sum is due as stated by the 
viewers. The decision of the viewers must be in writing, 
and must contain a statement of the matters submitted to 
them, and a statement of their decision. There must be 
three copies of this written decision, and one must be given 
to each party, and one filed with the County Clerk. The 
fee for each viewer is three dollars, one-half to be paid by 
each party. If either party refuses or neglects to abide by 
the decision of the viewers, the decision may be enforced 
by a suit in the Superior Court. 

Section 510.— MODOC COUNTY.— CONSTRUCTION 
OF DIVISION FENCE.— If one of the owners of adjoin- 
ing lands enclosed by a common fence desires to enclose 
his land separately, he may give notice to the other owner 
of the line or lines upon which he desires a division fence 
to be constructed. In the notice he must ofifer to build one- 
half of the fence himself, and must require the other owner 
to select which half of the fence he will build. If the party 
on whom the notice is served does not select the half of 
the fence he will build, and notify the party serving the 
notice of his selection within thirty days ; or if he makes a 
selection and fails to build his part of the fence within 
nine months from the time he is served with notice ; in either 
case, the party who gave the notice may build the entire 
fence, and collect from the other party one-half the cost 



15USTNKSS CONTRACTS AND LKGAL OBLIGATIONS. 291 

of the fence, with interest at one per cent per month until 
paid. 

Statutes of 1873, page 362; Statutes of 1875, 
page 71. 

Section 511.— MONO COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Mono 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 512.— MONTEREY COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Monterey 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 513.— NAPA COUNTY.— LAWFUL FENCES. 

— In Napa County, the following are lawful fences: (i) 
Post and rail fence, posts not less than four by six inches, 
set in the ground not less than two feet, with rails not 
less than three inches thick, placed not more than five 
inches apart for the first three feet, and after that not 
more than eight inches apart, the fence to be not less than 
five feet high ; (2) Worm fence must be five feet high, 
with additional stakes and riders, no greater space to in- 
tervene between the rails than in a post and rail fence ; 
(3) Post and slat fence must be of the same height, and 
with the same space between the slats as stated above, 
the post not less than twelve inches in circumference, and 
not less than two feet in the ground, the slats to be not less 
than one and a half inches thick, all well fastened to the 
post with twelve-penny nails ; (4) Paling fence must be of 
the same height, and the post of the same size, and set in 
the ground the same depth, as in a post and rail fence, with 
posts not more than ten feet apart; (5) Ditch fence must 
be four feet wide at the top, and three feet deep, with posts 
set in the embankment not over seven feet apart, with three 
slats not less than four inches wide and one and a half 



292 BUSINi:SS LAWS FOR BUSINESS MEN. 

inches thick, all securely fastened to the posts ; (6) Or 
any fence, which by reliable evidence shall be declared as 
strong, substantial, and as well calculated to protect en- 
closures, as either of the above described. 

Section 514.— NAPA COUNTY.— DIVISION FENCES. 

— The fence law for Napa County requires each owner to 
pay one-half the cost of division fences. The party who 
desires to erect a division fence must notify the other party, 
who must build one-half the fence. The fence must be built 
on or as near as practicable on the line. If after the notice 
is given, and a reasonable length of time has elapsed, and 
the party served with notice refuses to build one-half the 
fence, the party giving notice may proceed to build the 
entire fence, and can sue and collect from the other party 
one-half the cost. All partition fences separating adjoin- 
ing enclosures in Napa County must stand upon the line, 
and any person building a partition fence, and refusing to 
place it on the line, or refusing to remove it to the line, is 
liable to pay one-half the cost of its removal and erection in 
the right place. 

Section 515.— NAPA COUNTY.— REPAIR OF DI- 
VISION FENCES. — The owners or lessees of lands must 
keep up and maintain in good repair all partition fences, 
and must pay the cost in equal shares, so long as both 
parties continue to occupy or improve the adjoining lands. 
Statutes of 1855, page 155. 

Section 516.— NEVADA COUNTY.— FENCE LAW 
SAME AS IN AMADOR.— The fence law for Nevada 
County is the same as in Amador County. See Sections 

475. 476, 477. 478. 479- 

Section 517.— ORANGE COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA COUNTY.— The fence law for 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 293 

Orange County is the same as in Alameda County. See 
Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Section 518.— PLACER COUNTY.— FENCE LAW 
SAME AS IN COLUSA.— Tlie fence law for Placer County 
is the same as in Colusa County. See Sections 482, 483, 
484, 485, 486, 487. 

Section 519.— PLUMAS COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.^The fence law for Plumas 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 520.— RIVERSIDE COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Riverside 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 521.— SACRAMENTO COUNTY.— FENCE 
LAW SAME AS IN AMADOR COUNTY.— The fence 
law for Sacramento County is the same as in Amador 
County. See Sections 475, 476, 477, 478, 479. 

Section 522.— SAN BENITO COUNTY.— FENCE 
LAW SAME AS IN ALAMEDA.— The fence law for San 
Benito County is the same as in Alameda County. See Sec- 
tions 465, 466, 467, 468, 469, 470, 471, 472. 

Section 523.— SAN BERNARDINO COUNTY.— 
FfiNCE LAW SAME AS IN COLUSA.— The fence law 
fol San Bernardino County is the same as Colusa County. 
See Sections 482, 483, 484, 485, 486, 487. 

Section 524.— SAN DIEGO COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA COUNTY.— The fence law for 
San Diego County is the same as in Alameda County. wSee 
Sections 465, 466, 467, 468, 469, 470, 471, 472, 



294 BUSINESS LAWS I^OR BUSINESS MEN. 

Section 525.— SAN JOAQUIN COUNTY.— FENCE 
LAW NORTH AND EAST OF SAN JOAQUIN RIVER. 

— The fence law for all that portion of San Joaquin County 
lying north and east of the San Joaquin River is the same 
as in Amador County. See Sections 475, 476, 477, 478, 479. 

Section 526.— SAN JOAQUIN COUNTY.— FENCE 
LAW FOR REMAINDER OF COUNTY.— The fence law 
for the remainder of San Joaquin County is the same as in 
Alameda County. See Sections 465, 466, 467, 468, 469, 470, 
471, 472. 

Section 526a.— SAN LUIS OBISPO COUNTY.— 
FENCE LAW SAME AS IN AMADOR.— The fence law 
for San Luis Obispo County is the same as in Amador. 
See Sections 475, 476, 477, 478, 479. 

Section 527.— SAN MATEO COUNTY.— DIVISION 
FENCES. — Owners of adjoining lands in San Mateo 
County are mutually bound equally to maintain the fences 
between them, unless one of them chooses to let his land 
lie without fencing, in which case, if he afterwards encloses 
it, he must refund to the other a just proportion of the 
value at that time of any division fence made by the latter. 
If the party so enclosing refuses to pay for one-half of the 
division fence, in gold coin, the land enclosed becomes liable 
for it, and the value of one-half of the fence becomes and 
remains a lien upon the land, and draws interest at the rate 
of one per cent per month until paid. Notice of the lien 
must be filed in tht office of the County Recorder and fore- 
closed, the same as the filing and foreclosing of Mechanics' 
Liens. If the lien is foreclosed, the court will direct that 
so much of the land be sold as will satisfy the lien, with 
interest and costs. The lien may be waived, and a per- 
sonal suit brought against the owner of the land for one- 
half the value of the fence. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 295 

Section 528.— SAN MATEO COUNTY.— NOTICE TO 
BUILD FENCE. — Six months' notice must be given by 
one owner, who desires that a partition fence be erected or 
maintained, to the owner of the adjoining land. If the 
notice be to build a new fence, and the party served with 
notice after six months refuses to build or complete one- 
half of the fence, the part}^ giving the notice may build 
the entire fence and collect one-half the cost and expenses, 
in gold coin, with one per cent per month interest, from the 
party refusing. If the notice be to repair a partition fence, 
and ten days have elapsed and the party upon whom the 
notice was served refuses to repair one-half of the fence, 
the party w^ho served the notice may make the repairs 
himself, and collect one-half the cost in the same manner 
from the other party. The notice must be in writing, and 
may be served by delivering a copy to the owner of the 
adjoining land, or to the lessee or other occupant of the 
land ; and in case service of the notice cannot be made on 
the owner or other person in possession, then a copy must 
be posted on the land, and a copy filed in the office of the 
County Recorder; and, also, a copy must be deposited in 
the post-office, addressed to the owner at his place of resi- 
dence, if known, and if the owner's residence is not known, 
then the notice must be published one time in a newspaper 

in the county. 

» 

Section 529.— SAN MATEO COUNTY.— MANNER 
OF CONSTRUCTING FENCES.— Fences in San Mateo 
County may be constructed of posts and rails, posts and 
boards, pickets or palings, or may be a stone wall, but must 
be of sufficient height and strength to turn ordinary ani- 
mals. The law also provides that natural water-courses, 
not ordinarily passable by domestic animals, and deep 
gulches and gorges secured against animals by means of 
brush and picket fences, will be considered a sufficient 
division fence. 



296 busine:ss laws for busin:ESS me:n. 

^Section 530.— SAN MATEO COUNTY.— TRESPASS 
BY ANIMALS. — Any owner or occupant of land or pos- 
sessory claim, in San Mateo County, finding any animals 
which have done or are doing damage on his lands, whether 
the lands be enclosed by a lawful fence or not,- may take 
up and keep such animals, until his damages and costs are 
paid; or he may maintain an action against the owner of 
such animals for damages. 

Statutes of 1875, pages 173, 175. 

Section 531.— SANTA BARBARA COUNTY.— FENCE 
LAW SAME AS IN AMADOR.— The fence law for Santa 
Barbara County is the same as in Amador County. See 
Sections 475, 476, 477, 478, 479. 

Sections 532.— SANTA CLARA COUNTY.— FENCE 
LAW SAME AS IN ALAMEDA.— The fence law for 
Santa Clara County is the same as in Alameda County. 
See Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Section 533.— SANTA CRUZ COUNTY.— FENCE 
LAW SAME AS IN ALAMEDA.— The fence law for 
Santa Cruz County is the same as in Alameda County. See 
Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Sections 534.— SHASTA COUNTY.— FENCE LAW 
SAME AS IN COLUSA COUNTY.— The fence law for 
Shasta County is the same as in Colusa County. See Sec- 
tions 482, 483, 484, 485, 486, 487. 

Section 535.— SIERRA COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA COUNTY.— The fence law for 
Sierra County is the same as in Alameda County. See Sec- 
tions 465, 466, 467, 468, 469, 470, 471, 472. 

Section 536.— SISKIYOU COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Siskiyou 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 297 

County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 537.— SOLANO COUNTY.— FENCE LAW 
SAME AS IN AMADOR.— The fence law for Solano 
County is the same as in Amador County. See Sections 
475, 476, 477, 478, 479- 

Section 538.— SONOMA COUNTY.— LAWFUL DI- 
VISION FENCES. — Lawful division fences in Sonoma 
County are as follows: (i) If made of stone, four feet high, 
and not less than three feet base, and one foot thick on 
the top. (2) If it be worm fence, the rails must be well 
laid and at least three feet high. (3) If made of posts and 
boards, the posts must be well set in the ground, not less 
than eighteen inches in depth, and not wider apart than 
eight feet. If intended to turn all stock, it must be of at 
least five six-inch boards, or four eight-inch boards high, 
or four boards high with a ditch embankment equal to 
one board ; or four six-inch boards high, with a wire on 
top ; the boards to be six inches wide and one inch thick, 
the top board or wire to be four and one-half feet from the 
ground ; the first to be no more than two inches from the 
ground, the second four inches from the first, thence gradu- 
ated to the top board or wire, the spaces well divided, and 
the boards securely nailed to the posts. If intended, by the 
mutual agreement of adjoining land owners, to turn only 
neat cattle, horses, and mules, a three-board fence will be 
sufficient, the bottom board to be two feet from the ground. 
(4) If made of pickets, they must be not more than three 
inches apart; if made of posts and rails, or posts and poles, 
or a ditch or ditches, it must be equally strong and secure 
as a fence of posts and boards. (5) If made of wire, pick- 
ets, hedge, brush, or of any other materials, the fence to be 
lawful must be equal in strength and capacity to turn stock 
to the posts and board fence above described. 



298 BUSINESS LAWS I^OR BUSINESS MEN. 

Section 539.— SONOMA COUNTY.— POSTS USED 
FOR FENCES. — All posts used for fences in Sonoma 
County are required by law to be at least twelve inches 
in circumference, set at least eighteen inches in the ground, 
and must be replaced as often as the posts become decayed. 

Section 540.— SONOMA COUNTY.— OWNER TO 
BUILD AND KEEP IN REPAIR JUST PORTION OF 
FENCE. — Each of the adjoining land owners in the county 
of Sonoma is required by law to construct and keep in 
repair a just proportion of the line fence between their 
respective tracts of land. 

Section 541.— SONOMA COUNTY.— LAND BOR- 
DERING ON HIGHWAY.— The fence law for Sonoma 
County provides that any land bordering on a highway 
must be fenced by the owner with a "lawful fence; and the 
owner neglecting or refusing to build such fence, or when 
built, in keeping it in repair, has no recourse for the tres- 
passing of stock driven along the highway. 
Statutes of 1878, page 692. 

Section 542.— STANISLAUS COUNTY.— FENCE 
LAW SAME AS IN ALAMEDA.— The fence law for 
Stanislaus County is the same as in Alameda County. See 
Sections 465, 466, 467, 468, 469, 470, 471, 472. 

Section 543.— SUTTER COUNTY.— FENCE LAW 
SAME AS IN AMADOR.— The fence law for Sutter 
County is the same as in Amador County. See Sections 
475, 476, 477, 478, 479. 

Section 544.— TEHAMA COUNTY.— FENCE LAW 
SAME AS IN COLUSA.— The fence law for Tehama 
County is the same as in Colusa County. See Sections 482, 
483, 484, 485, 486, 487. 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 299 

Section 545.— TULARE COUNTY.— FENCE LAW 
SAME AS IN AMADOR.— The fence law for Tulare 
County is the same as in Amador County. See Sections 
475, 476, 477, 478, 479- 

Section 546.— TRINITY COUNTY.— LAWFUL 

FENCE. — The Legislature has provided what shall be a 
lawful fence in Trinity County. Every enclosure in Trinity 
County is a lawful fence which is four and a half feet 
high, if made of stone ; and if made of rails, five and a half 
feet high ; if made upon the embankment of a ditch three 
feet high from the bottom of the ditch, the fence must be 
two feet high ; the fence to be substantial and reasonably 
strong, and made so close that stock cannot get their heads 
through it, and if made to turn small stock, sufficiently 
tight to keep such stock out. A hedge fence is a lawful 
fence if five feet high and sufficiently close to turn stock. 

Section 547.— TRINITY COUNTY.— TRESPASSES 
BY ANIMALS. — The owner or manager of any horses, 
mules, jacks, jennies, hogs, sheep, goats, or neat cattle, 
which break into any grounds enclosed by a lawful fence 
in Trinity County, is liable to the owner of the premises 
for all damages sustained by the trespass ; and if the tres- 
pass is repeated by neglect o^ the owner of the stock, he 
will be liable in double the amount of damages. 
Statutes of 1850. 

Section 548.— TUOLUMNE COUNTY.— FENCE 
LAW SAME AS IN AMADOR.— The fence law for 
Tuolumne County is the same as in Amador County. See 
Sections 475, 476; 477, 478, 479. 

Section 549.— VENTURA COUNTY.— FENCE LAW 
SAME AS IN AMADOR.— The fence law for Ventura 
County is the same as in Amador County. See Sections 
475, 476, 477, 478, 479- 



300 BUSINESS LAWS FOR BUSINESS MEN. 

Section 550.— YOLO COUNTY.— FENCE LAW 
SAME AS IN ALAMEDA.— The fence law for Yolo 
County is the same as in Alameda County. See Sections 
465, 466, 467, 468, 469, 470, 471, 472. 

Section 551.— YUBA COUNTY.— FENCE LAW 
SAME AS IN AMADOR.— The fence law for Yuba County 
is the same as in Amador County. See Sections 475, 476, 
477, 478, 479. 

Rights and Liabilities of Professional Men — 
Physicians and Surgeons 

Section 552.— DUTY OF PHYSICIAN AND SUR- 
GEON. — Physicians and surgeons in active practice in 
California, as elsewhere, very often feel the need of know- 
ing what their legal rights and liabilities are, in connection 
with their relations to their patients. The law of Cali- 
fornia recognizes the medical profession as a learned and 
honorable one, and justly holds its members to a high stand- 
ard of moral and legal responsibility. A physician and 
surgeon, by taking charge of a case, impliedly represents 
that he possesses, and the law places upon him the duty 
of possessing^ that reasonable degree of learning and skill 
that is ordinarily possessed hy physicians and surgeons 
in the locality where he practices, and which is ordinarily 
regarded by those conversant with the employment as nec- 
essary to qualify him to engage in the business of practic- 
ing medicine and surgery. Upon consenting to treat a 
patient, it becomes his duty to use reasonable care and dili- 
gence, in the exercise of his skill and the application of his 
learning, to accomplish the purpose for which he was em- 
ployed. He is under the further obligation to use his best 
judgment, in exercising his skill and applying his knowl- 
edge. The law does not require him to possess that 
extraordinary learning and skill which belong only to a 
few men of rare endowments, but such only as is possessed 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 301 

by the average member of the medical profession in good 
Standing. Still, he is bound to keep abreast of the times, 
and a departure from approved methods in general use, if 
it injures the patient, will render him liable, however good 
his intentions may have been. 

Section 553.— LIABILITY FOR INJURY TO PA- 
TIENT. — The law holds the physician or surgeon liable 
for an injury to his patient resulting from the w^ant of the 
requisite knowledge and skill, or the omission to exercise 
reasonable care, or the failure to use his best judgment. 
The rule of reasonable care and diligence does not require 
the exercise of the highest possible degree of care, and to 
render a physician and surgeon liable, it is not enough 
that there has been a less degree of care than some other 
medical man might have shown, or less than he himself 
might have bestowed ; but there must be a want of ordi- 
nary and reasonable care, leading to a bad result. This 
includes not only the diagnoses and treatment, but also 
the giving of proper instruction to his patient in relation 
to conduct, exercise, and the use of medicines, and the 
care or dressing of w^ounds or sores, and the use of in- 
jured limbs. He is not liable for a mere error of judgment, 
provided he does what he thinks is best, after careful 
examination. His implied engagement with his patient 
does not guarantee a good result, but he does promise by 
implication, and it is his duty, to use the skill and learning 
of the average physician. It is his duty to exercise reason- 
able care, and to exert his best judgment, in the effort to 
bring about a good result. For any injury which a patient 
suffers, resulting from his negligence, or the want of skill, 
such as a physician or surgeon is required to possess and 
exercise, he will be liable to the patient in damages. 

Section 554.— DELAY IN MAKING AMPUTATION. 

— A physician or surgeon engages to bring to the treatment 
of his patient, care, skill, and knowledge; and if he waits too 



302 BUSINESS LAWS ^OR BUSINESS MEN. 

long before undertaking a necessary amputation, he must 
be held to have known of the probable consequences of 
delay, and is therefore answerable for the damages resulting 
from the delay. Thus, where a physician and surgeon was 
called to attend to a case where the bones of the foot 
were crushed by an accident, he waited ten days before 
operating, for the purpose of seeing whether the foot could 
be saved; gangrene appeared in consequence of the delay 
of ten days in the operation ; a second operation was per- 
formed, but the physician neglected to save flap enough 
to cover the end of the limb and bone, and subsequently 
there was a protrusion of the bone and a running sore ; 
the court held, that it is true that a physician and surgeon 
is not liable for mere errors in judgment, but his judgment 
must be founded upon his intelligence, and in that case he 
should have known the probable consequences that would 
follow from the crushing of the bones and tissues of the 
foot. 

Section 555.— FAILURE TO USE PROPER AP- 
PLIANCES. — A physician and surgeon must use proper 
appliances, such as are generally used by competent men 
in his profession, and for any failure to do so he will be 
liable to his patient in damages. Thus, neglect by a phy- 
sician treating a fracture of the larger bone of the leg to 
promptly use the customary appliances for extension, 
whereby the limb was materially shortened, in the absence 
of proof that the patient was unable to undergo such treat- 
ment, rendered the physician liable to him in damages. 

Section 556.— SKILL ACCORDING TO LOCALITY. 

— The standard of a physician's competency must be that 
reasonable care, skill, and diligence ordinarily exercised by 
others in the same profession in the same locality. Regard 
must be had to the advanced state of the profession at the 
time of the treatment, and to the opportunities afforded b}^ 
the particular locality for proficiency in the profession. For 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 303 

it is well known that some places afford better advantages 
than others, and the responsibility of a physician and sur- 
geon, located in a place where all the latest advantages 
of his profession are at hand, should justly be greater than 
the responsibility of one located in a place remote from 
the latest and best opportunities for learning and skill in 
the profession. The term "ordinary skill" means such skill 
as doctors in the same general neighborhood, in the same 
general lines of practice, ordinarily have and exercise in 
like cases. The question, therefore, where a physician is 
sued for damages for negligence in treating a patient, is 
always whether he has employed such reasonable skill and 
diligence as are ordinarily exercised in his profession in 
the locality where he practices. This is the rule in many 
States, and the law in California. But physicians or sur- 
geons, practicing in small towns, or rural or sparsely- 
populated districts, are bound to possess and exercise at 
least the average degree of skill possessed and exercised by 
the profession in such localities generally. 

Section 557.— LIABILITY FOR ABANDONING 
CASE. — It is the settled law in California that a physician 
may elect whether or not he will give his services to a case, 
and is not bound, when called upon, to accept the employ- 
ment ; but, when he does respond to a call, and accepts the 
oft'ered employment, he is bound to devote to the patient 
his skill and attention, and has the right to abandon the 
case only under one of two conditions : First, where the 
contract is terminated by the employer, which termination 
may be made immediate ; second, where it is terminated 
by the physician, which can only be done after due notice, 
and ample opportunity afforded to secure the presence of 
other medical attendance. A physician is never justified in 
abandoning a case without giving ample notice and oppor- 
tunity to the patient to employ another doctor, and he will 
always be liable in damages for abandoning a case without 
giving such notice. 



304 busine:ss laws for busini:ss me:n. 

Section 558.— ABANDONING CONFINEMENT 
CASE. — A case was decided by the Supreme Court of Cali- 
fornia, in which the abandonment of a confinement case was 
commented upon by the court, and the law of California 
clearly stated on this subject. A physician of San Fran- 
cisco was employed to attend Margaret A. Lathrope during 
her first confinement; he assumed charge of the case, visit- 
ing Mrs. Lathrope at intervals, but about midnight, on 
account of the nervous condition of his patient, the doctor 
left the house, without a word of explanation or suggestion 
to any one. Mr. Lathrope followed him into the street, 
imploring him to return, and not to leave his wife in that 
condition. The doctor refused. Mr. Lathrope asked him 
to recommend somebody, and the doctor replied : "You can 
get any one you like. I am not going back." Then he 
walked away. After an interval of an hour or more, during 
which time the patient was left with knowledge that the 
physician had abandoned her, and without any medical at- 
tendant, the presence of another physician was secured. 
The jury in the case gave Mrs. Lathrope a verdict of $2,000 
damages. The Supreme Court affirmed the judgment, upon 
the ground that the physician had no right to abandon the 
case as he did, without time or opportunity afiforded for 
the family to procure another doctor, and the court said : 
''Such conduct evidenced a wanton disregard, not only of 
professional ethics, but of the terms of his actual contract. 
It was a violation of that contract, and for all damages that 
resulted he was justly responsible." (Decided by the Su- 
preme Court of California, which decision is printed in 
Volume 63 of the Pacific Reporter, page 1007.) 

Section 559.~LIABILITY FOR NEGLIGENCE IN 
CASE OF GRATUITOUS SERVICE.— It will make no 
difference, in the liability of a physician or surgeon for 
negligence for treating a case, that he was rendering the 
services gratuitously. He has a right to take or refuse 
employment in any case, and to give or refuse his services 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 305 

if gratuitous. And if he chooses to give his services for 
nothing, he is still required to exercise the same reasonable 
ordinary care, skill, and diligence, as in cases where he is 
to receive pay for his services. 

Section 560.— BURDEN OF PROOF IN SUIT FOR 
DAMAGES. — AMien a physician or surgeon is sued for 
damages, the burden of proof is upon the plaintiff, to estab- 
lish by a preponderance of evidence that the patient was 
treated unskilfully. 

Section 561.— NEGLIGENCE OF PATIENT CON- 
TRIBUTING TO THE INJURY.— If the patient refuses 
to obey the instructions of his physician, and thus causes or 
contributes to the injury he suffers, even though the physi- 
cian is negligent or unskilful, this fact will have an impor- 
tant bearing on the verdict in a suit for damages. If the 
disobedience of the patient was such as to solely cause the 
injury, he cannot recover any damages at all; and if the 
injury to the patient was partly the result of his own re- 
fusal to obey instructions, and partly the result of the 
physician's neglect, the damages, if any are recovered, may 
be decreased in proportion to the patient's own contribu- 
tion to the injury itself. A patient is bound to submit to 
such treatment as his physician prescribes, provided the 
treatment be such as a physician of ordinary skill would 
adopt or sanction. 

Section 562.— DIPLOMA NO PROOF OF SKILL OR 
LACK OF SKILL.— The fact that a physician has or has 
not a diploma from a medical school is no proof either that 
he has skill or lacks it. His services as to skill or the 
contrary must be determined by his acts and conduct in 
attending the patient. It is the manner in which the serv- 
ices are performed that is the test of their character. 



306 BUSINESS LAWS I^OR BUSINESS MEN. 

Section 563.— CRIMINAL LIABILITY.— A physician 
may, by his negligence in causing the death of a patient, 
render himself liable to be punished for manslaughter; and 
he may, by performing an unlawful operation causing the 
death of the patient, render himself liable to be punished 
for murder. If a physician, however ignorant of medical 
science, prescribes with an honest intention of curing the 
patient, but through ignorance of the quality of the medi- 
cine prescribed, or of the nature of the disease, or both, 
the patient die in consequence of the treatment, contrary 
to the expectations of the physician, he is not guilty of 
murder or manslaughter; for he has only done what he 
thought was best under the circumstances, and without 
intention of committing a wrong. But if the physician 
prescribing have so much knowledge of the fatal tendency 
of the prescription that it may be reasonably presumed 
that he administered the medicine from an obstinate, wil- 
ful rashness, and not with an honest intention and expecta- 
tion of effecting a cure, he may be found guilty of man- 
slaughter. In cases where physicians have been charged 
with murder, the act committed has been usually such as 
the law expressly forbids ; and in such case, knowledge 
of the law on the part of the ph3^sician is presumed, and 
the intention is inferred from the character of the act. 

Section 564.— BOARD OF MEDICAL EXAMINERS. 

— The State has the power to provide for Boards author- 
ized to examine persons seeking to be admitted to practice 
medicine, and the Act creating the Board of Medical Ex- 
aminers for California has been declared by our Supreme 
Court to be valid and constitutional. 

Section 565.— PRACTICING WITHOUT A LICENSE. 

— The law of California provides that every person who 
practices medicine and surgery in this State must procure 
a license from the Board of Medical Examiners, after a 
personal examination on the following subjects : Anatomy, 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 307 

physiology, bacteriology, pathology, chemistry and toxi- 
cology, surgery, obstetrics, materia medica and thera- 
peutics, and theory and practice of medicine. When a 
person has successfully passed the examination, a certifi- 
cate is issued to him by the Board, authorizing him to 
practice medicine and surgery in California. The certificate 
must be recorded in the County Clerk's office of the 
county in which the holder is practicing his profession. 
The law provides that any person holding a certificate who 
shall practice medicine or surgery without first having 
filed his certificate with the County Clerk, is guilty of a 
misdemeanor, and punishable by a fine of not less than 
twenty-five dollars or more than one hundred dollars, or 
imprisonment in the County Jail for a period of not less 
than thirty days or more than sixty days, or by both such 
fine and imprisonment. The law also provides, that any 
person practicing medicine or surgery in California, with- 
out having at the time a valid, unrevoked certificate or 
license from the Board of Medical Examiners, shall be 
punished by a fine of not less than one hundred dollars 
or more than five hundred dollars, or by imprisonment 
for not less than sixty days or more than one hundred and 
eighty days, or both such fine and imprisonment. In each 
conviction for practicing medicine or surgery without a li- 
cense, one-half of the fine, when collected, will be paid to 
the prosecuting witness or witnesses, and the other half 
will be paid into the school fund of the county in which 
conviction was had. The law also defines who shall be con- 
sidered as practicing medicine or surgery in this State, as 
follows: (i) Those who profess to be, or hold themselves 
out as being, engaged as doctors, physicians, or surgeons 
in the treatment of disease, injury, or deformity of human 
beings; (2) Those who, for pecuniary or valuable consid- 
eration, prescribe medicine or electricity in the treatment 
of disease, injury, or deformity of human beings ; (3) Those 
who, for valuable or pecuniary consideration, employ sur- 
gical or medical means or appliances for the treatment of 



308 BUSINESS LAWS I^OR BUSINESS MEN. 

disease, injury, or deformity of human beings, except deal- 
ers in surgical, dental, and optical appliances ; (4) Those 
who, for a pecuniary or valuable consideration, prescribe 
or use any drug or medicine, appliance, or medical or sur- 
gical treatment, or perform any operation for the relief or 
cure of any bodily injury. 

Statutes of 1901, page 56. 

Section 566.— EVIDENCE IN TRIALS FOR PRAC- 
TICING WITHOUT LICENSE.— In trials of persons 
accused of practicing medicine or surgery without a license, 
the defendant must Drove, after the prosecution has showm 
that he has been practicing medicine, that he had a cer- 
tificate to practice as provided by law. The burden is on 
the accused to show that he had a license to practice as 
required by law, since it is a matter peculiarly within his 
own knowledge. Here, the party, if licensed, can immedi- 
ately show it, without the least inconvenience ; whereas, 
if proof of the negative were required from the prosecu- 
tion, the inconvenience would be very great. (Decided by 
the Supreme Court of California in the case of People vs. 
Hong, which decision is printed in Volume 55 of the Pacific 
Reporter, page 402.) 

Section 567.— RIGHT TO JURY TRIAL.— When a 
person is accused of practicing medicine without a license, 
he is entitled to a trial by jury. The law declares the 
offense to be a misdemeanor, but the Legislature has no 
power to take away the constitutional right to a jury trial 
of an offense against the public at large, which falls within 
the common law notion of crime or misdemeanor, and is 
embraced in the criminal code of the State. If a person 
accused of practicing medicine without a license is tried 
and convicted without a jury, he will be released oti Habeas 
Corpus. (Decided by the Supreme Court of California in 
the case of Wong You Ting, which decision is printed in 
Volume 106 of the California Reports, page 296.) 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 309 

Section 568.— CASES OF EMERGENCY.— The law 

of California against practicing medicine without a license 
does not prohibit gratuitous services in cases of emergency. 
A case of emergency is one in which the licensed medical 
practitioners are not readily obtainable ; as where the exi- 
gency is of so pressing a character that some kind of action 
must be taken before a licensed physician can be found 
or procured. If a person has received an injury in a 
remote, isolated part of the country, in which some person 
not a regular practitioner should be called upon to render 
immediate assistance, or in a case of obstetrics requiring 
immediate attention, such instances will constitute a case 
of emergency, which will justify a party not licensed in 
rendering assistance, and humanity and decency alike re- 
quire that it shall not be liable in a criminal prosecution 
for so doing. So, some person may get hurt, or faint, or 
fall in a fit in the street, and any person may render him 
assistance, and thus relieve him from pressing danger ; and 
it will be a case of emergency, which the law excepts from 
the operation of its penalties for practicing without a 
license. 

Section 569.— COMPENSATION OF PHYSICIANS. 

— The compensation to which a physician will be entitled 
will depend upon the contract between him and the patient, 
if there be a contract; and in the absence of a contract as 
to what the physician's fee shall be, the law will entitle 
him to a reasonable fee, taking into consideration the 
schedule of fees adopted by physicians in the neighbor- 
hood, if an}', and the character and extent of the services 
performed. The physician is the proper and the best judge 
of the necessity of frequent visits, and in the absence of 
proof to the contrary, the court will presume that all the 
professional visits made were deemed necessary, and were 
properly made. It would be a dangerous doctrine for the 
sick, to require a physician to be able to prove the necessity 
of each visit, before he can recover for his services. The 



310 BUSINESS LAWS I^OR BUSINESS MEN. 

frequency of visits is necessarily a matter of judgment, 
and concerning which no one, save the attendant physician, 
can decide. It depends, not only upon the condition of the 
patient, but, in some degree, upon the course of treatment 
adopted. 

A physician or surgeon w^ho renders services before he 
has procured a license from the Board of Medical Examin- 
ers to practice in this State, cannot recover anything in 
the courts for any service performed while he is without 
a license. It is against the law for him to practice with- 
out a license, however proficient he may be, and conse- 
quently any contract he may make for fees while without 
a license will be absolutely void ; nor will he be entitled 
to recover anything upon an implied contract. 

A husband is liable to a physician for medical services 
rendered to his wafe or minor children. The law goes still 
further, and declares that a physician called by a man to 
attend a woman supposed to be his wife can recover for 
his services, from the person summoning him, although the 
parties are not in fact legally married. One who calls a 
physician to attend a person whom he represents to be 
his wife cannot deny that fact, in an action for services 
rendered on the faith of such representation. 

Where a physician begins his attendance upon the pa- 
tient before obtaining his license to practice, he cannot 
recover any compensation for visits made prior to obtain- 
ing a license ; but he is entitled to compensation for services 
rendered the patient after receiving his license. 

Services rendered by a physician to a person since 
deceased creates a preferred claim against the estate, 
where the services were rendered during the last illness 
of the deceased. Suits on claims against an estate may 
be brought in any court, including a Justice's Court ; in the 
Superior Court, if the claim amounts to three hundred 
dollars or over; in the Justice Court, if the amount of the 
claim is less than three hundred dollars. But the judg- 
ment against the administrator can only have the effect 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 311 

of a claim duly allowed against the estate, to be paid in 
due course of administration. 

Section 570.— PHYSICIANS AS EXPERT WIT- 
NESSES. — Physicians are allowed to testify as expert 
witnesses in a class of cases which turn upon facts com- 
ing peculiarly within the domain of medical knowledge and 
science. A physician may testify as an expert to opinions 
and facts derived by him, not only from his experience 
and observation, but also from the works of standard au- 
thors which he may have read and studied in the line of 
his profession. If he refers to a certain book, to sustain 
the opinions which he has expressed, the book may be used 
to contradict him, or to discredit him. 

Section 571.— WITNESS FEES OF PHYSICIAN.— 

The law fixes the fees of witnesses at two dollars per 
day. There is no exception to this rule. Therefore, a 
physician who testifies as an expert, no matter how great 
the interests involved, is only entitled to the same fee as 
any other witness, namely, two dollars per day. 

Section 572.— MEDICAL TESTIMONY IN WILL 
CASES. — Will contests compose the greater number of 
cases in which physicians are required to testify as expert 
witnesses. In these cases, the testimony of the expert is 
directed to the question of the soundness or unsoundness 
of mind of the testator. A physician called as an expert 
witness may answer hypothetical questions, which assume 
physical conditions and the symptoms of mental disease, 
and from the facts and circumstances give his opinion upon 
the soundness or unsoundness of mind of the testator at 
the time the Vv^ill was made. But a physician cannot be 
examined as a witness as to any information derived in 
attending the patient which was necessary to enable him 
to prescribe or act for the patient. The attending physi- 
cian, therefore, will not be allowed to testify as to the 



312 businj:ss laws for busine:ss men. 

mental condition of his patient, unless the patient waived 
the privilege which the law gave him, that is, the privi- 
lege to seal the lips of his physician so that he might 
never make disclosures of confidential .communications or 
matters observed by him while the relation of physician 
and patient existed. But, although dead, the patient may 
leave behind him evidence which indicates an express in- 
tention to waive the privilege ; as, for instance, where he 
requests his physician to sign his will as a witness, he 
by so doing makes him a competent witness to testify as 
to the circumstances attending the execution of the will, 
including the mental condition of the testator at the time. 

Section 573.— PRIVILEGED COMMUNICATIONS 
GENERALLY.— The law of California is, on the subject 
of privileged communications, that a licensed physician or 
surgeon cannot, without the consent of his patient, be 
examined in a civil action as to any information acquired 
in attending the patient which was necessary to enable 
him to prescribe or act for the patient (Code of Civil Pro- 
cedure, Section 1881). The object and purpose of this 
law is to enable the patient to make a full statement of 
his physical infirmities to his physician, with the knowl- 
edge that the law recognizes the communications as con- 
fidential, and guards against the possibility of his feelings 
being shocked or his reputation tarnished by their sub- 
sequent disclosure. No communication made to or infor- 
mation acquired by the physician, in treating his patient, 
can be disclosed by him in a civil suit, without the consent 
of his patient. The patient alone can give consent, and 
when the patient is dead, the matter is forever closed. To 
the patient, the considerations are even more weighty that 
the privilege remain inviolate after he has gone to his 
grave, for his good name is left behind deprived of his 
protecting care ; and the Supreme Court of California, 
speaking of this, has said : ''His rights are not buried in 



BUSINESS CONTRACTS AND LEGAL 'OBLIGATIONS. 313 

the grave, and heirs and devisees quarrehng among them- 
selves over a division of his property, in justice to his 
memory, should not be allowed to waive the privilege." 

The rule as to privileged communications between pa- 
tient and physician does not apply to criminal cases. The 
language of the law makes it specially to apply only to 
civil suits, and leaves the physician or surgeon free to 
testify as to all facts or communications acquired by him, 
in cases Avhich become the subject of inquiry in criminal 
prosecutions. 

Section 574.— COUNTY PHYSICIANS.— The County 
Government Act requiring the Board of Supervisors to 
appoint some suitable graduate in medicine to attend the 
indigent and sick, means a person legally licensed to prac- 
tice medicine under the laws of the State, and does not con- 
fine the appointment to college graduates. 

If, after a contract with a county, which compels the 
physician to perform such services only as the Supervisors 
may require, they put it out of his power to render the 
services, he is still entitled to his salary. 

The contract with a county physician having been made 
with the Board of Supervisors, it is not in their power to 
terminate the contract by rescinding the order under which 
the physician was appointed, or by abolishing the office. 
He is entitled to his salary for the term for which he was 
appointed, though the Supervisors put it out of his power, 
or disable him from rendering his services. 

Rights and Liabilities of Professional Men — 
Dentists 

Section 575.— LIABILITY FOR NEGLIGENCE.— 

The practice of dentistry has of late years assumed a po- 
sition which justly entitles it to rank among the professions. 
And a dentist, like a doctor of medicine, will be liable 



314 busine:ss laws for business men 

in damages for such negligence in doing his work as re- 
sults in injury to his patron. He must keep himself sup- 
plied with the appliances and means of doing his work 
such as are usually employed and used by competent den- 
tists practicing the profession in the same locality. He 
must be possessed of at least the average competency in 
the profession. He must exercise at least ordinary care, 
skill, and diligence in the performance of his work. For 
negligence resulting in injury to his patron, arising from 
carelessness and inattention to the good work which people 
have a right to expect of a competent dentist, he will be 
liable in damages. He will not be liable for a mere mistake 
of judgment, leading to a bad result, any more than a 
physician will. He will only be liable for the result of 
negligence so gross as to be inexcusable, for carelessness 
so flagrantly a breach of his duty as to raise the implica- 
tion of law that it was wilful and intentional. 

Section 576.— COMPENSATION OF DENTISTS.— 

The compensation of a dentist is left to the agreement of 
himself and patron. But if he does work without any 
agreement as to the 'compensation he shall receive for it, 
the law will entitle him to a reasonable compensation. 
What is a reasonable compensation will depend upon the 
character of the work done, and the usual charges in the 
locality for such work by competent dentists, and the 
time and skill employed in doing the work. 

Rights and Liabilities of Professional Men — 
Oculists 

Section 577.— LIABILITY FOR NEGLIGENCE — 

An oculist, like a dentist, must be possessed of at least 
the average skill and proficiency among others of his 
kind in the same locality, and he must keep himself sup- 
plied with the usual and practical appliances. He must 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 315 

exercise ordinary care, skill, and diligence in the perform- 
ance of his work. Indeed, it would seem but just that 
he should be held to as strict an accountability as any 
physician or surgeon, for his work has always to do with 
one of the delicate and sensitive organs of the human body. 
And if in the performance of his work he fails to use that 
care, skill, and diligence which must be expected of him, 
and by his carelessness, neglect, or unskilful treatment, 
injures a person, he is liable for whatever damages may 
ensue. The damages which may be recovered against 
him, for negligence and tmskilful treatment, will be ac- 
cording to the extent of the injury inflicted. 

Section 578.— COMPENSATION OF OCULISTS.— 

The agreement of the parties will fix the compensation of 
an oculist. If there is no agreement, there must be a rea- 
sonable compensation, depending upon the character of 
the work done and services rendered, the usual charges 
in the locality for similar services by competent oculists, 
and the time and skill employed. 

Rights and Liabilities of Professional Men — 
Attorneys-at-Law 

Section 579.— DUTIES OF ATTORNEYS.— It is the 

general duty of an attorney-at-law to counsel or maintain 
such actions, proceedings, or defenses only as appear to 
him legal or just, except that a person charged with a 
crime is always entitled to his defense ; also, it is the duty 
of an attorney to employ, for the purpose of maintaining 
the cases confided to him, such means only as are con- 
sistent with truth, and he should never seek to mislead 
the court by an artifice or false statement of fact or law. 
It is the duty of an attorney to maintain inviolate the 
confidence, and at every peril to himself, to preserve the 
secrets of his clients. It is the duty of an attorney never 
to encourage either the commencement or the continuance 



316 BUSINESS LAWS I^OR BUSINE:SS MliN. 

of a suit, from any corrupt motive or from passion or 
interest. It is the duty of an attorney never to reject, for 
any consideration personal to himself, the cause of the 
defenseless or the oppressed. 

Section 580.— AUTHORITY OF ATTORNEY.— An 

attorney has authority to bind his client in any of the steps 
of an action or proceeding, by his agreement filed with the 
clerk of the court, or entered upon the minutes of the 
court. An attorney also has authority to receive money 
claimed by his client in an action or proceeding, during 
its pendency, or after judgment; and upon the payment 
to him of the money, he may discharge the claim or ac- 
knowledge satisfaction of the judgment. 

Code of Civil Procedure, Section 283. 

Section 581.— COMPENSATION OF ATTORNEY.— 

The compensation of an attorney is left to the agreement, 
express or implied, between himself and his client. 

Section 582.— CHANGE OF ATTORNEY.— The au- 
thority of an attorney is revocable, and the client has a 
right to change the attorney at any time. A new attorney 
may be brought into the case, and substituted for the old, 
upon consent of both client and attorney, filed with the 
clerk, or entered upon the minutes of the court ; or upon 
the order of the court, upon the application of either client 
or attorney, after notice from one to the other. 

Section 583.— LIABILITY OF ATTORNEY.— A per- 
son who holds himself out to practice law, makes an im- 
plied agreement with his client that he has the requisite 
skill and learning to properly attend to the business in- 
trusted to his care. He will not be liable for mistakes 
of judgment, or for any results adverse to the interest 
of his client, where he uses ordinary care, and does the 
best he can under the circumstances. But if the interest 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 317 

of his client suffers from his ignorance of things which 
he ought to know, and engages with his cHent that he 
does know, or if by reason of his neglect or carelessness 
a loss occurs, he will be liable in damages to the person 
injured. 

Rights and Liabilities of Professional Men — 
Teachers in the Public Schools 

Section 584.— MALE AND FEMALE TEACHERS — 

The rights and liabilities of teachers in the public schools 
are the same, whether the teacher in question be male 
or female. In the Sections which follow under the above 
heading, the matters discussed are therefore intended to 
apply to all persons who make teaching a profession, and 
who are employed in the public schools of California. 

Section 585.— EMPLOYMENT OF THE TEACHER. 

— Trustees of school districts in California have the power 
and duty to employ the teacher, but cannot enter into any 
contract with a teacher to extend beyond the 30th day of 
June next ensuing. Trustees of school districts fix the 
salary of the teacher. In incorporated cities having Boards 
of Education, the teachers are employed by the Board, and 
their salaries are fixed by the Board. The Board of Edu- 
cation will employ teachers for High Schools. In order 
to constitute a valid employment, whether by Trustees of 
a school or by a Board of Education, there must be a 
quorum present and the majority voting in favor of em- 
ploying the teacher. The employment may be in writing 
or by oral contract. 

Section 586.— TERM OF EMPLOYMENT.— District 

School Trustees or a Board of Education have the power 
to elect the teacher for the full term, and they have the 
power to fix the term of employment for any shorter period 
of time. They may employ a teacher for a week, a month. 



318 BUSINESS LAWS I^OR BUSINESS MEN. 

half a term, or the full term. They have also the power 
to employ a teacher without specifying the duration of 
the term. Where a city Board of Education employs a 
teacher, without specifying any term, the Supreme Court of 
California has decided that this is an employment for life. 
Where a Board of District School Trustees employ a 
teacher, without specifying any term, the employment will 
be at the mere pleasure of the Board, and the teacher will 
be subject to be discharged as any other employee without 
a fixed term of employment. 

Section 587.— ELECTION FOR LIFE.— The law that 
the election of teacher without specifying any term is 
an election for life applies only to holders of city certifi- 
cates, teaching in the cities in which such certificates were 
granted. The question of the term of employment where 
no term was stated in the contract, and when such em- 
ployment could be lawfully terminated by Boards of Edu- 
cation, was for a long time a prolific source of contention ; 
but the Supreme Court of California, in the celebrated case 
of Kate Kennedy vs. the Board of Education of the City 
and County of San Francisco, definitely determined the mat- 
ter. Miss Kennedy was a teacher in the schools of San 
Francisco, under a resolution of employment by the Board 
which fixed no definite term. She went on a vacation, and 
when she returned, the Board offered to place her in a posi- 
tion other than the one she left, and at a less salary, and she 
refused to accept it. The Board then refused to restore 
her to her old position, and she brought suit to be restored 
to it, alleging that her employment was for life, and that 
she could only be removed after an investigation and for 
cause. The Supreme Court decided that she was in for 
life, unless removed for cause. The Kennedy case was 
decided upon provisions of the Political Code, reading as 
follows : ''The powers and duties of Trustees of School 
Districts and Boards of Education in cities are as follows: 
To employ the teachers, janitors, and employees of schools ; 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 319 

to fix and order paid their compensation, unless the same 
be otherwise prescribed by law ; provided, that no Board 
of Trustees shall enter into any contract with such em- 
ployees to extend beyond the 30th day of June next en- 
suing." "The holders of city certificates are eligible to 
teach in the cities in which such certificates were granted, 
of schools of grades corresponding to the grades in such 
certificates, and when elected, shall be dismissed only for 
violation of the rules of the Board of Education, or for 
incompetency, unprofessional or immoral conduct." The 
Supreme Court said in this case : 'Tt is unnecessary for us 
to hold that the Board had not the power to limit the 
term of service by an express contract. It is enough to say 
that this was not done in this instance. She was elected 
without limitation as to time. Although her right to take 
the position depended upon the act of the Board, the 
right to continue in it w^as preserved to her by the statute, 
and to take it from her was to deprive her of a right given 
her by law, and to which she has a right to be restored 
by mandamus. The term for w^hich she was entitled to 
hold her position was not fixed by any contract with the 
Board. The duration of her term of service is fixed by 
the statute, and her removal from it was not merely a 
violation of the contract but of an expressed provision of 
law forbidding such removal." 

The Kennedy case is cited, because nearly all teachers 
know something of the circumstances, of the case, through 
rumor or other information, and most teachers believe 
that the decision goes much further than it does. The 
truth is, the Supreme Court in the Kennedy case only 
decided that a teacher employed by a city Board of Edu- 
cation for no definite term, is in for life, unless removed 
for cause. In ordinary School Districts, and in High 
Schools, where a teacher is employed for no definite time, 
he may be dismissed at any time, without assigning any 
cause, the same as any other employee. 



320 BUSINESS LAWS FOR BUSINESS MEiN. 

Section 588.— CONTRACT WITH TEACHER.— A 

vote of the Board of Education or Board of School Trus- 
tees in favor of employing a certain person as teacher does 
not constitute a binding contract. Employment implies 
a contract on the part of the employer to hire, and on 
the part of the employee to perform services, and, until 
such a contract is mutually entered into, it can have no 
binding obligations upon either party. The words "to 
employ" teachers mean nothing more than that the Board 
is clothed with power to contract with suitable persons to 
engage in the work of teaching in the public schools for 
a fixed salary or compensation. The ballots are only an 
expression of choice on the part of the members casting 
them, and have no greater force or effect than an oral 
vote would have. At most, they amount only to an offer 
of employment, which the teacher has a right to refuse, 
and the Board has a right to revoke or cancel at any time 
before acceptance. (Decided by the Supreme Court of 
California in the case of Malloy vs. Board of Education 
of City of San Jose, and printed in Volume 102, California 
Reports, page 642.) 

Section 589.— DISMISSAL OF TEACHER.— A teacher 
may be dismissed before the expiration of the term, for 
unfitness or incompetency. The School Trustees, when- 
ever they undertake to dismiss a teacher before the ex- 
piration of his term of employment, must take their chances 
of keeping within the law. They cannot dismiss a teacher 
without cause, and escape responsibility for their act. 
In case of the dismissal of any teacher before the expira- 
tion of his contract, the teacher may appeal to the School 
Superintendent, and if the Superintendent decides that the 
removal was made without good cause, the teacher so 
removed must be reinstated, and will be entitled to compen- 
sation for the time lost during the pendency of the appeal. 
If a teacher is dismissed without cause, before the end of 
the term, he has a right to sue the Board of Trustees for 



BUSINESS LAWS I'OR BUSINE:SS MEN. 321 

the salary which would have been earned by him if he 
had been allowed to complete his term. The law pro- 
vides that Boards of Trustees are liable as such, in the 
name of the district, for any judgment against the district 
for salary due any teacher on contract. The teacher should 
wait until the expiration of the term, in the meantime hold 
himself in readiness to perform the duties of the school, 
and then sue for the full amount of the salary due him. 

Section 590.— DUTY OF TEACHERS.— Every teacher 
in the public schools must, before assuming charge of a 
school, file his or her certificate with the Superintendent 
of Schools. Every teacher must enforce the course of 
study, the use of the legally-authorized text-books, and the 
rules and regulations prescribed for the schools. Teachers 
must hold pupils to a strict account for their conduct on 
the way to or from school, on the playground, or during 
recess ; and may suspend, for good cause, any pupil from 
the school, and make a report of such suspension to the 
Board of School Trustees or Board of Education, as the 
case may be, for review. Teachers must notify the County 
Superintendent of the opening or closing of schools, one 
week before. Every teacher must make a report, show- 
ing the classifications and grading of all pupils who have 
attended the school during the school year. Teachers must 
make such other reports as may be required from time to 
time by the State Superintendent or the County Super- 
intendent, Board of School Trustees, or City Board of 
Education. 

Section 591.— DUTY TO TEACH PRINCIPLES OF 
MORALITY. — The law of California provides, that it is 
the duty of all teachers to endeavor to impress on the 
minds of pupils the principles of morality, truth, justice, 
and patriotism ; to teach them to avoid idleness, profanity, 
21 



322 BUSINESS LAWS FOR BUSINESS MEN 

and falsehood ; to instruct them in the principles of a free 
government, and to train them up to a true comprehension 
of the rights, duties, and dignity of American citizenship. 

Section 592.— RIGHT OF TEACHER TO PUNISH 
PUPILS.— All pupils must comply with the regulations 
and submit to the authority of the teacher. Continued 
wilful disobedience, or open defiance of authority of the 
teacher, may be punished by expulsion from school. 
Habitual profanity or vulgarity on the part of the pupil 
may be punished by suspension from school. The teacher, 
also, has the right to intiict reasonable punishment in other 
ways. He may use a ruler, a leather strap, a switch, and 
apply it to the body of the pupil, by way of punishment, 
and to enforce the good conduct of the pupil, provided 
he does so in a reasonable manner. He may also adopt 
methods of punishment which will appeal to the pride or 
shame of the pupil, such as pointing the pupil out to the 
school, or keeping him in at recess, or other methods 
short of corporal punishment. But in all methods of pun- 
ishment adopted by the teacher, he must be guided by 
reason and good sense, and cannot lawfully inflict any 
punishment which is unusual and cruel. 

Section 593.— TEACHER'S LIABILITY FOR CRUEL 
AND UNUSUAL PUNISHMENT OF PUPIL.— A 

teacher who punishes a pupil in a cruel and unusual man- 
ner may be prosecuted for a misdemeanor, or he may be 
sued for damages by the parents of the child. In such a 
prosecution or suit, if it appears that the teacher was in- 
tentionally inhuman or cruel in his punishment of the 
child, or that the severity of the punishment inflicted was 
such as to shock the moral sense and reason of the com- 
munity, the law will not sanction his conduct, but will 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 323 

leave him to be dealt with for a criminal offense or in a 
civil suit for damages. 

Section 594.— ADMISSION OF CHINESE CHIL- 
DREN. — The Trustees have power to exclude children 
of filthy or vicious habits, or children suft'ering from con- 
tagious or infectious diseases, and also to establish sepa- 
rate schools for children of Chinese descent. Where no 
such separate schools have been established, a child be- 
tween 6 and 21 years of age, of Chinese parentage, is en- 
titled to admission to the public school of the district 
in which the child resides. The vicious, the filthy, and 
those having contagious or infectious diseases, may be ex- 
cluded, without regard to their race, color, or nationality. 
But a Chinese child, not within either of those classes, 
has the same right to enter a public school as any other 
child has. And if a Board of School Trustees, or a Board 
of Education, should pass a resolution that no Chinese 
children should be admitted to the schools, the teacher 
could not shield himself behind the resolution for improp- 
erly excluding a pupil from his school. For the Trustees 
or Board of Education have power to make, establish, and 
enforce all necessary and proper rules and regulations not 
contrary to law, and none others, and teachers cannot justify 
an unlawful action on their part on the ground that a 
resolution of Trustees or Board of Education required them 
to do it. 

Section 595.— ADMISSION OF COLORED CHIL- 
DREN. — Colored children have equal rights with white 
children to admission to any public school in California, 
and cannot be refused admission to the same school wdth 
white children. It is the duty of the teacher, therefore, to 
admit any child of African descent, between the ages of 
six and twenty-one years, who applies for enrolment as 
a pupil in his school. 



324 BUSINESS LAWS FOR BUSINESS MEN. 

Searchers of Record 

Section 596.— ABSTRACTS OF TITLE.— An abstract 
of title is a condensed history of the title to the land, 
consisting of a synopsis or summary of the material por- 
tions of all the conveyances of record, of whatever kind 
or nature, which in any manner affect the land, or any 
estate or interest in the land, together with a statement 
of all liens, charges, or liabilities to which the property 
may be subject, and of which it is in any way material for 
purchasers to be apprised. The object of the abstract is 
to enable the purchaser, or his attorney, to pass more 
readily on the sufficiency of the title. Therefore, a com- 
plete abstract should show whatever appears of record 
which concerns the sources of the title and its present 
condition. The descent and line of the title should be 
clearly traced out, and all encumbrances and liens of every 
sort, and all adverse claims, and the material parts of all 
patents, deeds, wills, judicial proceedings, and other records 
or documents wdiich touch the title. 



Section 597.— SEARCHERS OF RECORD.— From the 

necessity of having an abstract of record of the title to 
land, and the volume and extent of the records themselves, 
has grown that class of expert searchers known as ab- 
stracters, or searchers of record, whose business it. is to 
prepare in a condensed and convenient form the data from 
which it can be determined whether the title is good or 
bad, or free from encumbrance, and if encumbered at all, 
the character of the encumbrance. So important is their 
work, and so much depends upon the accuracy and fidelity 
of the abstracts they furnish, that it is to be expected by 
those who engage in the business of furnishing abstracts 
that any errors or omissions resulting in damages will incur 
a liability on their part to their patrons. 



BUSINESS CONTRACTS AND LKGAL OBLIGATIONS. 325 

Section 598.— LIABILITY OF SEARCHERS OF 
RECORD. — One who holds himself out to the world as 
an examiner of titles, and who undertakes to furnish cor- 
rect abstracts of title, is bound to exercise skill and carf 
in making the examination, and in preparing the abstract, 
and is liable in damages for a failure to exercise that duty. 
Persons engaged in the business of making abstracts of 
title occupy a relation of confidence towards those em- 
ploying them, Avhich is second only in the sacredness of 
its nature to the relation which a lawyer sustains to his 
client. Searchers of record consult the evidences of own- 
ership, and become familiar with the chains and histories 
of title. They handle private title papers, and become 
aware of whatever weaknesses or defects may exist in the 
legal proceedings through which the ownership of real 
property is secured. And the courts have said, that they 
should be held to a strict responsibility in the exercise 
of the trust and . confidence which are necessarily reposed 
in them. 

Section 599.— TO WHOM LIABLE.— The liability of 
a searcher of records for want of skill or ordinary care and 
diligence is only to the party employing him. An action 
for damages for errors or omissions in an abstract of title 
cannot be sustained by a third person acting upon the 
faith^of the correctness of the abstract, as there is no con- 
tract between him and the abstracter. The abstracter 
knows that his records are to be seen, and titles to be 
made in reliance upon them, but he is not bound to know 
that his certificate is for the use or reliance of any but 
the person who receives it, nor can it be assumed that he 
gives it for any other use. He contracts with the person 
who requests and pays for it, to give a certificate which 
shall state the facts ; but he enters into no relation of 
contract or duty in respect to it with any other person ; 
and, if another relies upon it to his injury, he cannot recover 
damages against the abstracter, because the latter assumed 



326 BUSINESS LAWS ]?0R BUSINESS MEN. 

no duty for his protection. A searcher of records is Hable 
for his neghgence only to the person who requests and 
pays for the certificate of search. He is not Hable to the 
grantee of the person who employed him, as there was no 
contract between them. A searcher of records, employed 
by the owner to prepare an abstract of title for the purpose 
of procuring a loan, is not liable in damages to the lender, 
for a loss caused by a mistake in the abstract, there being 
no contract between him and the lender. It is a general 
rule that a searcher of records is liable for damages, because 
of his negligence or mistake, only to his immediate em- 
ployer, and not to the latter's assigns, vendees, or devisees, 
nor to any third person between whom and himself there 
is no contract relation. 

Section 600.— LIABILITY FOR MISTAKE.— A 

searcher of records, giving a certificate of title, is liable 
to his employer for any mistake arising from want of due 
care or diligence, or from ignorance of his business. 

Section 601.— LIABILITY FOR OMITTING EN- 
CUMBRANCE. — If a searcher of records undertakes to 
furnish a purchaser of land with a full abstract of title, 
he is liable in damages for his negligence in carelessly 
omitting from the abstract any mention of a particular 
encumbrance, by which the purchaser is put to additional 
expense to perfect his title. 

Section 602.— MARGINAL REFERENCE IN REC- 
ORD BOOK. — When a searcher of records undertakes 
to make a complete abstract of title, he takes the obligation 
upon himself to make a full and true search and examina- 
tion of all the records relating to the land, and to note in 
the abstract accurately every transfer, conveyance, or other 
instrument of record in any way affecting the title. He 
is not required to give any opinion as to the legal effect 
of any of the instruments, and just how full a description 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 3'27 

of them he shall give is, to a certain extent, a matter 
for himself to decide ; but in so far as he assumes to 
describe the recorded instruments, he is required to make 
his descriptions accurate. The record, and not a mar- 
ginal reference to it by the Recorder, nor an index ref- 
erence to the instrument, is what determines the char- 
acter and legal effect of the instrument ; and the duty of 
the searcher of records is not fulfilled by merely assuming 
the accuracy of a marginal reference, without examining 
the instrument itself. In failing to examine the record 
of the instrument itself, the searcher is guilty of negli- 
gence. So, in a case where a partial release of a mortgage 
was recorded, and a register of deeds, in his reference to it 
on- the margin of the record of the mortgage erroneously 
made the entry "Satisfied" (with a reference to the book 
and page where the release was recorded), when in fact 
it should have been ''Partially satisfied," and the searcher, 
in making up the abstract, relied upon this marginal entry 
entirely, supposing it to be correct, and did not examine 
the contents of the instrument of release itself, and the 
party procuring the abstract was afterwards compelled to 
pay the mortgage ; it was held by the court that the searcher 
was guilty of negligence, and was liable for whatever the 
party had been compelled to pay. 

Section 603.— OMITTING JUDGMENT AND SALE. 

— If a searcher of records, employed by a purchaser to 
make an abstract, omits to note the fact of a judgment and 
sale of the land for taxes, of which the purchaser is igno- 
rant until the time for redemption has expired, whereby 
he is caused to pay out money to remove the cloud from 
his title, the abstracter is liable in damages to the purchaser 
for the sum paid out by him. 

Section 604.— INCORRECT REPORT OF QUAN- 
TITY OF LAND CONVEYED.— If a searcher of records 
incorrectly reports in the abstract the quantity of land 



328 BUSINESS LAWS FOR BUSINESS MEN. 

previously conveyed, he is liable in damages to the person 
who employed him and relied upon the information in 
purchasing the land. 

Section 605.— MEASURE OF DAMAGES.— The 

damages suffered must be actual damages. The law will 
not compel a searcher of records, even though he has been 
guilty of inexcusable negligence or ignorance, in prepar- 
ing the abstract, to pay any damages by way of punish- 
ment. The person who employed him is entitled to the 
actual money loss, by reason of the negligent act or omis- 
sion, and that is all. 

Section 606.— WHEN SUIT FOR DAMAGES MUST 
BE COMMENCED.— In California, a suit against a 
searcher of records for damages must be commenced 
within two years after the delivery of the defective abstract, 
or it is barred by the statute of limitations. 

Section 607.— SALE OF GOOD WILL OF AB- 
STRACTING BUSINESS.— Section 1674 of the Civil 
Code of California, providing that one who sells the good 
will of a "business" may agree with the buyer to refrain 
from carrying on a similar "business," is broad enough to 
include, and does include, the business of abstracting. 

Notary Public 

Section 608.— DUTIES OF NOTARY.— The duties of 

a Notary Public are prescribed by law, and are varied and 
important. In business affairs, the taking of acknowledg- 
ments to deeds, mortgages, leases, and other instruments, 
constitutes the greater and most important part of a 
Notary's work. His duties, however, extend to a number 
of other matters. He is required, when requested, to de- 
mand acceptance and payment of foreign, domestic, and 
inland bills of exchange, or promissory notes, and protest 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 329 

the same for non-acceptance and non-payment ; he may take 
acknowledgment or proof of powers of attorneys, mort- 
gages, deeds, grants, transfers, and other instruments of 
writing executed by any person ; he may take depositions 
and affidavits, and administer oaths, to be used before any 
court, judge, officer, or board in this State. He is required 
to keep a record of all official acts done by him ; to keep a 
record of the parties to every instrument acknowledged or 
proved before him, with the date and character of the in- 
strument; and when requested, and upon payment of his 
fees, he must make and give a certified copy of any record 
in his office. 

Section 609.— BOND OF NOTARY.— Every Notary 
in California must give an official bond in the sum of 
$5,000, which must be approved by the Judge of the Su- 
perior Court of his county, and recorded as other official 
bonds of county officers. 

Section 6io.~LIABILITY OF NOTARY.— The law 

provides that for the official misconduct or neglect of a 
Notary Public, he and the sureties on his official bond are 
liable to the parties injured for all the damages sustained. 
Political Code, Section 801. 

Section 611.— V/HAT ACTS COVERED BY OF- 
FICfAL BOND. — The condition of the bond of a Notary 
Public being, that he will "well and truly perform and 
discharge the duties of a Notary Public according to law " 
this embraces every act which he is authorized or required 
by law to do in virtue of his office. By accepting the office, 
a Notary contracts with those who employ him that he 
will perform the duties of the office with integrity, dili- 
gence, and skill. He gives his bond to indemnify those 
who shall suffer by the unfaithful or unskilful performance 
of his duty. Before a Notary and his bondsmen can be 
held liable for damages, it is necessary to determine 



330 bustne:ss laws ^or business men. 

whether the act done or not done was or not authorized 
by law, was or not incumbent upon him, was or not re- 
quired of him, whether he was directed to do it, whether 
he has failed to . discharge the duty, and whether injury 
has been sustained. Where a Notary does a thing which 
the law does not authorize him to do, although he does 
it in his capacity of Notary Public, his bondsmen are not 
responsible for his act. Notaries and their sureties are 
liable only to the persons who have employed the Notary, 
and are only liable to those who suffer injury on account 
of the Notary's failure to perform the duty incumbent upon 
him or required by law. 

Section 612.— LIABILITY OF SURETIES ON 
OFFICIAL BOND.— The surety on a Notary's official 
bond is only bound for such acts of his as the law author- 
izes or requires him to do in his official capacity. By 
signing the bond, the surety tells all who may need the 
services of a Notary : ''You can go with security to this 
Notary; I assure you that he is a competent officer; that 
he will well a^nd faithfully discharge and perform all the 
duties imposed upon him by law ; and if he fails in doing 
so, I will be responsible to you for losses sustained." If, 
therefore, a person calls on a Notary for the performance 
of a duty incumbent upon him, and the Notary fails or 
neglects his duty, and injury is suffered, the surety is 
liable to the party injured. A surety cannot be held liable 
because the notary has done acts which the law did not 
authorize or compel him to perform, and which were there- 
fore not incumbent upon him. The sureties upon the offi- 
cial bond of a Notary Public are only liable for damages 
occasioned by his negligence or misconduct in the line of 
his official duty. 

Section 613.— PREMATURE PROTEST OF PROM- 
ISSORY NOTE. — In case of a promissory note falling 
due, according to its face, upon Sunday, a Notary cannot 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 831 

present it for payment, nor make protest, on the preceding 
Saturday. The following Monday is the proper date for 
presentment and protest, unless that is also a legal holi- 
day, when the next would be the proper day. Sunday, 
not being a legal day for exacting payment, cannot be 
computed, except when it is an intermediate day. To do 
so would make another contract for the parties, and by 
requiring payment on Saturday would compel the obliga- 
tion to be met before the contract time for its performance 
had arrived. The act of a Notary in wrongfully protesting 
a promissory note before it is due gives a right of action 
against him for damages, and against his bondsmen, in 
favor of the injured party. For the Notary is presumed 
to know the wrongful character of the act, and that, in 
the trading community, the protest of a note is likely to 
impair the maker's credit. If lawfully protested, the maker 
cannot complain; but he can complain, and justly so, if 
presentment and protest are made prematurely, before the 
law authorizes the acts. 

Section 614.— FALSE CERTIFICATE TO AC- 
KNOWLEDGMENT.— The sureties on the official bond 
of a Notary are liable for the full amount of a mortgage 
purchased in reliance on the genuineness of the Notary's 
certificate of acknowledgment, where the certificate is in 
fact false and the mortgage a forgery, and where the pur- 
ported maker was solvent and able to pav the mortga<^e 
debt. AAHien a Notary certifies that the mortgagor duly 
acknowledged the execution of a mortgage, which in fact 
is a forgery, the measure of damages, in a suit against the 
Notary or his sureties, brought by one who has parted 
with value on the face of such certificate, is the amount 
which Avould be the value of the mortgage if genuine. The 
value of the mortgage depends not merely upon the value 
of the mortgaged property, but also on the solvency of 
the mortgagor. When it appears, in such a suit for dam- 
ages, that the plaintiff, had the mortgage been genuine, 



332 BUSINESS LAWS I?OR BUSINi:SS MKN. 

would have been able to collect the whole amount named 
therein, he is entitled to recover that amount from the No- 
tary or his sureties, without regard to the value of the mort- 
gaged property or the interest of the mortgagor in the 
property. If it should appear that the mortgage, if valid, 
could not be collected and would not be worth anything, 
then the plaintiff would not be entitled to damages, because 
it would not be shown that he had suffered any injury. 
But whatever value was shown, if the mortgage were valid, 
could be recovered against the Notary and his sureties. 

Section 615.— NOTARY CANNOT AMEND CER- 
TIFICATE. — When an acknowledgment has been made, 
before a Notary, the party making it has done all that 
the law requires to make the instrument his act and deed. 
The embodiment of the fact of acknowledgment, in the 
form of the certificate prescribed by law, devolves upon 
the Notary, and not upon the party making it. And if 
the Notary blunders in certifying to an acknowledgment 
duly made, or if he makes a defective or false certificate, 
he cannot alter or amend it; because, after taking the ac- 
knowledgment and delivering the return, his functions 
cease, and he is discharged from all further authority. 
The Superior Court, and not the Notary, has power to 
correct a defective certificate of acknowledgment. 

Section 616.— NOTARY'S KNOV/LEDGE OF PARTY 
ACKNOWLEDGING INSTRUMENT.— A Notary is 
bound to know the person acknowledging an instrument 
before him, or, if he is not personally acquainted with 
him, he is bound to have the person's identity established 
by competent proof. If he knows the person, he may so 
state in his certificate of acknowledgment; if he does not 
know him personally, he may state in his certificate of 
acknowledgment the proof presented to establish his 
identity. When a Notary Public, in taking and certify- 
ing an acknowledgment to a mortgage, neglected to state 



BUSINESS CONTRACTS AND LE:GAL OBLIGATIONS. 333 

in his certificate that the party acknowledging the instru- 
ment was known to him, or was identified by the testimony 
of a witness examined by him for that purpose, the Su- 
preme Court of Cahfornia held that the Notary was guilty 
of gross negligence, and that he and his bondsmen were 
responsible to the party injured for the damages resulting 
from his negligence. The Court said : "Plaintiff loaned to 
one Dupuy a sum of money, taking as security a mortgage 
on a lot in San Francisco. The mortgage was acknowl- 
edged b}^ Dupuy before defendant Finlay, who was a 
Notary Public. The mortgage used was an ordinary 
printed form, having a certificate of acknowledgment in 
blank, in which was inserted, in the hand of one Sanders., 
who acted in the transaction as attorney for both mort- 
gagor and mortgagee, the name of the mortgagor and 
the date of the acknowledgment. To this certificate the 
Notary afiixed his signature and seal, but omitted to state 
either that the party acknowledging was known to him, 
or was identified by the testimony of a witness examined 
for that purpose. In consequence of this omission, the 
record of the mortgage was held not to impart notice to 
subsequent encumbrancers. Plaintiff's lien was postponed 
in favor of a later mortgage, which exhausted the entire 
property, and Dupuy being insolvent, the debt was lost. 
Plaintiff now seeks to recover, on the bond of the Notary, 
the damages suffered by the negligent and unskilful per- 
formance of an official act. The purpose of a certificate 
of acknowdedgment is to entitle the deed to be recorded, 
and to be admitted in evidence without further proof. 
The certificate furnished was utterly worthless for either 
purpose. This neglect is not excused by the fact that the 
certificate had been partially filled by the attorney for the 
grantee. The certificate, upon its face, is unfinished; the 
date and the name of the grantor had been inserted, leav- 
ing it for the Notary to insert his knowledge or the evidence 
received of the identity of the party making the acknovvl- 



334 BUSINESS LAWS FOR BUSINESS MEN. 

edgment. If the Notary read the certificate before signing 
it, this omission must have been known to him ; if he did 
not, he is equally guilty of negligence, for an officer who 
affixes his official signature and seal to a document, without 
examining it to find whether the facts certified are true, 
can scarcely be said to faithfully perform his duty accord- 
ing to law." (Decided by the Supreme Court of California 
in the case of Fogarty vs. Finlay, which decision is printed 
in Volume lo of the California Reports, page 239.) 

Section 617.— PARTY INTRODUCED TO NOTARY. 

— The acknowledgment of an instrument must not be taken, 
unless the Notary taking it knows, or has satisfactory evi- 
dence, on the oath or affirmation of a credible witness, that 
the person making such acknowledgment is the individual 
who is described in and who executed the instrument. A 
Notary has no right, in disregard of this plain provision of 
the law, to certify that he knows a person whom he does 
not know, on the mere introduction of a third party; and 
if he does so, and a loss results, he renders himself and his 
sureties liable to make good the loss. 
Civil Code, Section 1185. 

Section 618.— MISAPPROPRIATION OF MONEYS. 

— As it is no part of the official duty of a Notary to receive 
money from or for anybody, his sureties are not liable for 
money fraudulently obtained and retained by him. So, if 
a Notary Public, wdio is also a real estate agent and en- 
gaged in negotiating loans, by false representations pro- 
cures money upon forged mortgages, and then retains the 
money, his sureties are not liable. The sureties upon an 
official bond are not sureties for the general good behavior 
of the officer. They are responsible only for his official 
misconduct or neglect. As stated, it is no part of the duty 
of a Notary Public to receive money from or for anybody. 
It is misconduct, but not official misconduct, for a Notary 



busine:ss contracts and le:gal obligations. 335 

to fraudulently obtain money in the manner stated. He 
does not receive any money in his official capacity. The 
sureties on his official bond are not liable for such mis- 
conduct, because it is only against his official misconduct 
that the sureties consent to indemnify persons injured by 
him. 

Section 619.— FEES OF NOTARY.— The fees of Nota- 
ries allowed by law are as follows : For drawing and copy- 
ing every protest for non-payment of, a promissory note, or 
for the non-payment or non-acceptance of a bill of exchange, 
draft, or check, two dollars ; for drawing and serving every 
notice of non-payment of a promissory note, or of the 
non-payment or non-acceptance of a bill of exchange, order, 
draft, or check, one dollar ; for recording every protest, one 
dollar; for drawing an affidavit, deposition, or any paper 
other than those above mentioned, for each folio, thirty 
cents ; for taking an acknowledgment or proof of a deed 
or other instrument, to include the seal and the writing 
of the certificate, for the first two signatures, one dollar 
each, and for each additional signature, fifty cents ; for 
administering an oath or affirmation, fifty cents ; for every 
certificate, to include writing it, and the seal, one dollar. 
Political Code, Section 798. 

Carriers of Freight 

Section 620.— FREIGHT AND FREIGHTAGE.— 

Property carried is called freight; the compensation to be 
paid for its carriage is called freightage ; the person who 
delivers the freight to the carrier is called the consignor; 
and the person to whom it is to be delivered is called the 
consignee. 

Section 621.— CARE AND DILIGENCE REQUIRED 
OF CARRIERS. — A carrier of property for compensation 



336 BUSINESS LAWS FOR BUSINESS MEN. 

must use at least ordinary care and diligence in the per- 
formance of all his duties. 

Section 622.— DIRECTIONS TO CARRIERS.— When 

the directions of a consignor and consignee are conflicting, 
the carrier must comply with those of the consignor in 
respect to all matters except the delivery of the freight, as 
to which he must comply with the directions of the con- 
signee. But the consignor may give special directions to 
the carrier to receive no orders of any kind from the con- 
signee inconsistent with his own. 
Civil Code, Section 21 16. 

Section 623.— DELIVERY OF FREIGHT.— A carrier 
of freight must deliver it to the consignee, at the place 
to which it is addressed, in the manner usual at that place. 
If there is no usage to the contrary at the place of delivery, 
freight must be delivered as follows: (i) If carried upon 
a railway owned or managed by the carrier, it may be de- 
livered at the station nearest to the place to which it is 
addressed; (2) If carried by sea from a foreign country, it 
may be delivered at the wdiarf where the ship moors, within 
a reasonable distance from the place of address ; or if there 
is no wharf, on board a lighter alongside the ship; or, (3) 
In other cases, it must be delivered to the consignee or his 
agent, personally, if either can, with reasonable diligence, 
be found. 

Civil Code, Section 21 19. 

Section 624.— OBLIGATIONS OF CARRIER WHEN 
FREIGHT NOT DELIVERED.— If, for any reason, a 
carrier does not deliver freight to the consignee or his 
agent personally, he must give notice to the consignee of 
its arrival, and keep the freight in safety, upon his responsi- 
bility as a warehouseman, until the consignee has had a 
reasonable time to remove it. If the place of residence 
or business of the consignee be unknown to the carrier, 



BUSINESS CONTRACTS AND LE:GAL OBLIGATIONS. 337 

he may give the notice by letter dropped in the nearest 
post-office. If the consignee does not accept and remove 
freight within a reasonable time after the carrier has ful- 
filled his obligation to deliver, or duly offered to fulfil the 
same, the carrier may exonerate himself from further lia- 
bility by placing the freight in a suitable warehouse, on 
storage, on account of the consignee, and giving notice 
thereof to him. 

Civil Code, Sections 2120, 2121. 

Section 625.— BILL OF LADING.— A bill of lading is 
an instrument in writing, signed by a carrier or his agent, 
describing the freight so as to identify it, stating the name 
of the consignor, the terms of the contract for carriage, 
and agreeing or directing that the freight be delivered to 
the order or assigns of a special person at a special place. 
All the title to the freight which the first holder of a bill 
of lading had when he received it passes to every subse- 
quent indorsee in good faith and for value, in the ordinary 
course of business. A bill of lading represents the prop- 
erty for which it has been given, and by its indorsement 
or by delivery without indorsement the property in the 
goods may be transferred, when such is the intent with 
which the indorsement or delivery is made. By the rules 
of commercial law, bills of lading are regarded as symbols 
of the property therein described, and the delivery of such 
bill, by one having an interest in or a right to control the 
property, is equivalent to a delivery of the property itself. 
A consignor may effectuate a sale or pledge of the prop- 
erty consigned by delivery of the bill of lading to the pur- 
chaser or pledgee, as completely as if the property were 
in fact delivered. Bills of lading are chosen in action, and 
instruments of this character may be transferred for a 
valuable consideration by delivery only. The indorsee for 
value of a bill of lading which has been delivered to him 
may bring an action in his own name for the goods. And 
generally in all cases where the shipper having the right 



338 busine:ss laws for business men. 

of property indorses and delivers the bill of lading, the 
indorsee may maintain an action for the goods represented 
by such bill of lading in his own name. A person pur- 
chasing a draft drawn by the shipper of the goods, with a 
bill of lading accompanying it, has a special property in 
the goods covered by the bill of lading; and usually in 
the case of a time draft this special property vests in the 
purchaser of the draft as security for its acceptance. It 
may be, if so agreed between the shipper and the purchaser 
of the draft, that the purchaser will have a right to retain 
the bill of lading, and thus retain his special property in 
the goods shipped, not only for the acceptance but for the 
payment of the draft. When a bill of lading is made to 
the "bearer," or in equivalent terms, a simple transfer, by 
delivery, conveys the same title as an indorsement. 
Civil Code, Sections 2126, 2127, 2128. 

Section 626.— NUMBER OF BILLS OF LADING.— 

A carrier must subscribe and deliver to the consignor, on 
demand, any reasonable number of bills of lading, of the 
same tenor, expressing truly the original contract for car- 
riage ; and if he refuses to do so, the consignor may take 
the freight from him, and recover from him, besides, all 
damages he sustains. 

Civil Code, Section 2130. 

Section 627.— CARRIER EXONERATED BY DE- 
LIVERY. — A carrier is exonerated from liability for 
freight by delivering it in good faith, to any holder of 
a bill of lading, properly indorsed, or made in favor of 
the bearer. When a carrier has given a bill of lading, he 
may require its surrender, or a reasonable indemnity against 
claims thereon, before delivering the freight. 
Civil Code, Sections 2131, 2132. 

Section 628.— WHEN FREIGHT MUST BE PAID.— 

A carrier may require his freightage to be paid upon his 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 339 

receiving the freight; but if he does not demand it then, 
he cannot do so until he is ready to dehver the freight to 
the consignee. The carrier may demand payment in ad- 
vance, subject to a liabiHty to refund it if not earned. 
Civil Code, Section 2136. 

Section 629.— WHO MUST PAY FREIGHT.— The con- 
signor of freight is presumed to be liable for the freightage ; 
but if the contract between him and the carrier provides 
that the consignee shall pay it, and the carrier allows the 
consignee to take the freight, he cannot afterward collect 
the freightage from the consignor. The consignee of 
freight is liable for the freightage, if he accepts the freight 
with notice of the intention of the consignor that he should 
pay it. If a part of the freight is accepted by a consignee, 
without a specific objection that the remainder is not de- 
livered, the freightage must nevertheless be apportioned 
and paid as to that part. If a consignee voluntarily re- 
ceives freight at a place short of the one agreed upon for 
delivery, the carrier is entitled to a just proportion of the 
freightage, according to the distance. If the carrier, be- 
ing ready and willing, offers to carry the freight to the 
destination originally intended, he is entitled to the full 
freightage. 

Civil Code, Sections 2137, 2138, 2139, 2141, 2142. 

Section 630.— FREIGHT CARRIED FARTHER 
THAN AGREED.— If freight is carried beyond the 
destination agreed upon by the parties, the carrier is not 
entitled to any additional compensation. 
Civil Code, Section 2143. 

Section 631.— OBLIGATION TO ACCEPT FREIGHT. 

— It is a general rule that a common carrier must, if able 
to do so, accept and carry whatever freight is offered. The 
freight must be oft'ered at a reasonable time and place, and 
be of a kind that the common carrier undertakes or is 



340 BUSINESS LAWS I^OR BUSINESS MI:n. 

accustomed to carry. For if the freight offered is not of 
the kind which the carrier has undertaken to carry, or if 
it be a dangerous shipment, another rule may prevail. A 
common carrier is not bound to receive goods which are 
so defectively packed that their condition will entail upon 
the company extra care and extra risk ; nor dangerous 
articles, such as nitroglycerine, dynamite, gunpowder, 
aquafortis, oil of vitriol, matches, etc. It is optional with 
the carrier to accept such freight; it may accept or reject 
it, when offered ; and when accepted at all, the carrier may 
insist upon such limitations of its liability as it sees fit. 
A common carrier may not relieve itself from any liability 
imposed upon it by law under the dictates of public policy; 
but, on the other hand, upon any question of private right, 
or the right of private property, it may lessen the degree 
of responsibility which attaches to it as an insurer, by any 
contract not in itself unreasonable. Thus, the shipping 
receipt may lawfully exempt the carrier from liability from 
loss by fire, where inflammable or combustible articles of 
freight are offered for carriage. 

Section 632.— AGREEMENTS TO LIMIT LIABIL- 
ITY. — The obligations of a common carrier can only be 
limited by special agreement. General notice by the car- 
rier is not sufficient, and a special contract with each 
shipper is required by the law. But a common carrier 
cannot be exonerated, even by special contract, from its 
liability for the gross negligence, fraud, or wilful wrongs 
of itself or servants. A consignor or consignee, by accept- 
ing a bill of lading, or written contract for carriage, with 
knowledge of its terms, assents to the rate of hire, and the 
time, place, and manner of delivery therein stated ; and 
also to the limitation stated therein upon the amount of 
the carrier's liability in case property carried in packages, 
trunks, or boxes is lost or injured, when the value of the 
property is not named ; and also to the limitation stated 
therein to the carrier's liability for loss or injury to live 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 341 

animals carried. But his assent to any other modification 
of the carrier's obhgations contained in such instrument 
can be manifested only by his signature to the same. 
Civil Code, Section 2176. 

Section 633.— GENERAL LIABILITY OF COMMON 
CARRIERS FOR LOSS.— Unless the consignor accom- 
panies the freight and retains exclusive control thereof, 
an inland common carrier of property is liable for loss or 
injury of the property from any cause whatever, except: 
(1) An inherent defect, vice, or weakness, or a spontaneous 
action, of the property itself; (2) The act of a public en- 
emy of the United States, or of this State ; (3) The act of 
the law; or (4) Any irresistible superhuman cause. The 
first exception, inherent defects, includes decay of fruits, 
the diminution, leakage, or evaporation of liquids, and the 
spontaneous combustion of goods. In all these cases, 
where the negligence of the carrier does not cooperate in 
the loss, he will be excused. Live animals are also in- 
cluded in this exception, to whatever extent they injure 
themselves or one another, impelled by their inherent vices 
and propensities. A public enemy, the second exception, 
is one with whom the nation or State is at open war, and 
pirates on the high seas, who are universally treated as 
the enemies of all mankind. By the act of the law, stated 
as the third exception, is meant the contingency of goods 
attached, or taken under execution, or other legal process. 
By the fourth exception, an irresistible superhuman cause, 
is meant some act of God, as where freight is destroyed 
by lightning, or volcanic eruption, or other cause over 
which human agency could have no control. 
Civil Code, Section 2194. 

Section 634.— LIABILITY FOR DELAY.— A common 
carrier is liable for delay only when it is caused by his want 
of ordinary care and diligence. 

Civil Code, Section 2196. 



342 BUSINESS LAWS FOR BUSINESS MEN. 

Section 635.— SHIPMENT OF GOLD, PRECIOUS 
STONES, STATUARY, PICTURES, GLASS OR 
CHINAWARE. — A common carrier of gold, silver, 
platina, or precious stones, or of imitations thereof, in a 
manufactured or unmanufactured state ; of timepieces of 
any description ; of negotiable paper or other valuable 
writings ; of pictures, glass, or chinaware ; of statuary, silk, 
or laces ; or of plated ware of any kind, is not liable for 
more than fifty dollars upon the loss or injury of any one 
package of such articles, unless he has notice, upon the 
receipt thereof, by mark upon the package or otherwise, 
of the nature of the freight; nor is such carrier liable upon 
any package carried for more than the value of the articles 
named in the receipt or the bill of lading. 
Civil Code, Section 2200. 

Section 636.— ACCEPTING FREIGHT FOR PLACE 
BEYOND USUAL ROUTE.— If a common carrier accepts 
freight for a place beyond its usual route, it must, unless 
otherwise agreed, deliver the freight at the end of its route 
in that direction to some other competent carrier carrying 
to the place of address, or connected with those who thus 
carry; and its liability ceases upon making such delivery. 
If freight addressed to a place beyond the usual route of 
the common carrier who first receives it is lost or injured, 
the carrier must, within a reasonable time after demand, 
give satisfactory proof to the consignor that the loss or 
injury did not occur while the freight was in its charge, 
or it will be liable for the loss. 

Civil Code, Sections 2201, 2202. 

Letters of Credit 

Section 637.— WHAT IS A LETTER OF CREDIT.— 

A letter of credit is a written instrument, addressed by 
one person to another, requesting the latter to give credit 
to the person in whose favor it is drawn. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 343: 

Section 638.— HOW ADDRESSED.— A letter of credit 
mav be addressed to several persons in succession. 

Section 639.— LETTERS GENERAL OR SPECIAL.— 

A letter of credit is either general or special. When the 
request for credit in a letter is addressed to specified per- 
sons, by name or description, the letter is special. All other 
letters of credit are general. A letter of credit addressed 
to a particular person is limited to him, for the writer must 
be deemed to have granted it in reliance on his prudence 
and discretion in acting upon it. A general letter of credit 
gives any person to whom it may be shown authority to 
comply with its request, and by so doing, it becomes, as to 
him, of the same effect as though addressed to him by name. 
Several persons may successively give credit upon a general 
letter. 

Section 640.— LIABILITY OF THE WRITER.— The 

writer of a letter of credit is, upon the default of the debtor, 
liable to those who gave credit in compliance with its terms. 
By giving the letter, the writer obliges himself to accept 
such bills or orders as may be drawn under it in good faith, 
and within the limits of the credit specified in the letter. 

Section 641.— LETTER OF CREDIT MAY BE A 
CONTINUING GUARANTY.— If the parties to a letter 
of credit appear by its terms to contemplate a course of 
future dealing between the parties, it is not exhausted by 
giving a credit, even to the amount limited by the letter, 
which is subsequently reduced or satisfied by payments 
made by the debtor, but it is to be deemed a continuing 
guaranty. 

Section 642.— WHEN NOTICE TO THE WRITER 
NECESSARY.— A letter of credit must by its terms ex- 
press or imply the necessity of giving notice, or no notice 
of credit obtained upon it will be necessary. The writer 



344 BUSINESS LAWS FOR BUSINESS MEN. 

of a letter of credit is liable for credit given upon it with- 
out notice to him, unless it can be seen from the letter itself 
that notice to the writer was intended by the parties. Un- 
less there is something in the nature of the contract or 
terms of the letter making acceptance or notice necessary 
as a condition of liability, neither is necessary to bind the 
writer. 

Section 643.— CREDIT GIVEN MUST AGREE WITH 
TERMS OF LETTER.— The law of California provides, 
that if a letter of credit prescribes the persons by whom 
or the mode in whicn the credit is to be given, or the term 
of credit, or limits the amount, the writer is not bound 
except for transactions which, in these respects, conform 
strictly to the terms of the letter. 

Civil Code, Sections 2858, 2859, 2861, 2862, 2864, 
2865. 

Section 644.— INTENTION OF PARTIES.— In cases 
where doubt arises as to the real meaning of a letter of 
credit, the rule of law is that the terms of the letter will 
be liberally and reasonably construed. The intention of 
the parties is the essential thing to be ascertained. But 
words of doubtful meaning, or technical terms, or local 
expressions, used in a letter of credit, cannot be taken 
advantage of to defeat the liability of one who signs and 
gives such a letter. True, it is a general rule, that the 
surety or guarantor should not be held beyond the precise 
stipulations of his contract, and he has a right to insist 
upon the exact performance of any condition inserted in 
the letter. But when the question is as to the meaning 
which shall be given to the terms used in the instrument, 
the law will always be found liberal and reasonable ; for 
letters of credit are commercial instruments, generally 
drawn up by merchants in brief language, and often loose 
in their structure and aim ; and to give the words of a 
letter of credit a nice and technical construction, would 



BUSINESS CONTRACTS AND LE:GAL OBLIGATIONS. 345 

not only defeat the intention of the parties in many in- 
stances, but render them too unsafe a basis to rely on for 
extensive credits, so often sought in the present active 
business of commerce throughout the world. Therefore, 
it is well to remember, that while parties will be held by 
the law to the terms of their contract, yet the law will not 
allow a person who advances money on the faith of a letter 
of credit, however loosely drawn, to suffer loss by any 
strained or technical construction of the language or direc- 
tions contained in it. 

Bills of Exchange 

Section 645.— NATURE OF BILLS OF EXCHANGE. 

— A bill of exchange is an instrument, negotiable in form, 
by which one, who is called the drawer, requests another, 
called the drawee, to pay a specified sum of money. A bill 
of exchange may give the name of any person in addition 
to the drawee, to be resorted to in case of need. 

Section 646.— BILL IN PARTS OF A SET.— A bill of 
exchange may be drawn in any number of parts, each part 
stating the existence of the others, and all forming one 
set. An agreement to draw a bill of exchange binds the 
drawer to execute it in three parts, if the other party to 
the agreement desires it. Presentment, acceptance, or 
payment, of a single part in a set of a bill of exchange, 
is sufficient for the whole. 

Civil Code, Sections 3171, 3172, 3173, 3174, 3175 

Section 647.— WHERE BILL OF EXCHANGE IS 
PAYABLE. — A bill of exchange is payable: (i) At the 
place where, by its terms, it is made payable; or, (2) If it 
specify no place of payment, then at the place to which it 
is addressed ; or, (3) If it be not addressed to any place, 
then at the place of residence or business of the drawee, 
or wherever he may be found. If the drawee has no place 



346 BUSINESS LAWS FOR BUSINE:SS M^N. 

of business, or if his place of business or residence cannot 
with reasonable diligence be ascertained, presentment for 
payment is excused, and the bill may be protested for non- 
payment. 

Civil Code, Section 3176. 

Section 648.— WHEN BILL OF EXCHANGE MAY 
BE PRESENTED FOR ACCEPTANCE.— A bill of ex- 
change may be presented by the holder to the drawee for 
acceptance, at any time before it is payable, and if accept- 
ance is refused, the bill is dishonored. When a bill of 
exchange is payable at a specified time after sight, the 
drawer and indorsers are exonerated if it is not presented 
for acceptance within ten days after the time which would 
suffice, with ordinary diligence, to forward it for acceptance, 
unless presentment is excused. 

Section 649.— HOW PRESENTMENT MUST BE 
MADE. — Presentment of a bill of exchange for acceptance 
must be made in the following manner, as nearly as by 
reasonable diligence is practicable: (i) The bill must be 
presented by the holder or his agent; (2) It must be pre- 
sented on a business day, and within reasonable hours ; 
(3) It must be presented to the drawee, or, if he be absent 
from his place of residence or business, to some person 
having charge thereof, or employed therein ; and the drawee, 
on such presentment, may postpone his acceptance or re- 
fusal until the next day. If the drawee have no place of 
business, or if his place of business or residence cannot, 
with reasonable diligence, be ascertained, presentment for 
acceptance is excused, and the bill may be protested for 
non-acceptance. Presentment for acceptance to one of 
several joint drawers, and refusal by him, dispenses with 
presentment to the others. A bill of exchange which speci- 
fies a drawee in case of need must be presented to him for 



busine;ss contracts and le:gal obligations. 347 

acceptance or payment, as the case may be, before it can 
be treated as dishonored. 

Civil Code, Section 3186. 

Section 650.— ACCEPTANCE MUST BE IN WRIT- 
ING. — An acceptance of a bill of exchange must be made 
in writing, by the drawee or by an acceptor for honor, and 
may be made by the acceptor writing his name across the 
face of the bill, with or without other words. The holder 
of a bill of exchange, if entitled to an acceptance, may treat 
the bill as dishonored if the drawee refuses to write across 
its face an unqualified acceptance. 

Section 651.— WHAT MAY BE TREATED AS SUF- 
FICIENT ACCEPTANCE.— The holder of a bill of ex- 
change may, without prejudice to his rights against prior 
parties, receive and treat as a sufficient acceptance: (i) An 
acceptance written upon any part of the bill, or upon a 
separate paper; (2) An acceptance qualified so far only as 
to make the bill payable at a particular place within the 
city or town in which, if the acceptance was unqualified, 
it would be payable; or, (3) A refusal by the drawee to 
return the bill to the holder after presentment, in which 
case the bill is payable immediately, without regard to its 
terms. The acceptance of a bill of exchange by a separate 
instrmnent binds the acceptor to one who, upon the faith 
thereof, has taken it for value. An unconditional promise, 
in writing, to accept a bill of exchange, is a sufficient accept- 
ance, in favor of every person who upon the faith thereof 
has taken the bill for value or other good consideration. 
Civil Code, Sections 3195, 3197. 

Section 652.— WHEN ACCEPTANCE MAY BE CAN- 
CELED. — The acceptor of a bill of exchange may cancel 
his acceptance at any time before the delivery ot the bill 
to the holder, and before the holder has, with the consent 



348 BUSINESS LAWS FOR BUSINE:SS MEN. 

of the acceptor, transferred his title to another person for 
value upon the faith of such acceptance. 
Civil Code, Section 3198. 

Section 653.— WHAT IS ADMITTED BY ACCEPT- 
ANCE. — The acceptance of a bill of exchange admits the 
signature of the draw^er, but does not admit the signature 
of any indorser to be genuine. 

Section 654.— ACCEPTANCE OR PAYMENT FOR 
HONOR. — On the dishonor of a bill of exchange by the 
drawee, or, in case of a foreign bill, after it has been duly 
protested, it may be accepted or paid by any person, for 
the honor of any party to it. The holder of a bill of ex- 
change is not bound to allow it to be accepted for honor, 
but is bound to accept payment for honor. The person 
accepting or paying for honor must write a memorandum 
upon the bill, stating for whose honor he accepts or pays, 
and must give notice to such parties, with reasonable dili- 
gence, of the fact that he has accepted or paid the bill. 
Having done so, he is entitled to reimbursement from the 
parties for whom he pays, and from all parties prior to 
them. A bill of exchange which has been accepted for 
honor must be presented at its maturity to the drawee for 
payment, and notice of its dishonor by him must be given 
to the acceptor for honor, in like manner as to an indorser ; 
after which the acceptor for honor must pay the bill. The 
acceptance of a bill of exchange for honor does not excuse 
the holder from giving notice of its dishonor by the drawee. 
Civil Code, Sections 3203, 3204, 3205, 3206, 3207. 

Section 655.— PRESENTMENT FOR PAYMENT.— 

If a bill of exchange is by its terms payable at a particular 
place, and is not accepted on presentment, it must be pre- 
sented at the same place for payment. A bill of exchange, 
accepted payable at a particular place, must be presented 
at that place for payment, when presentment for payment 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 349 

is necessary, and need not be presented elsewhere. If a 
bill of exchange, payable at sight or on demand, without 
interest, is not duly presented for payment within ten days 
after the time in which it could, with reasonable diligence, 
be transmitted to the proper place for such presentment. 
the drawer and indorsers are exonerated, unless such pre- 
sentment is excused. The circumstances which v/ill excuse 
delay are such as occur through floods, or storms, or war, 
or pestilence, or famine, rendering travel or comm.unication 
impossible. Mere delay in presenting a bill of exchange 
payable with interest, at sight or on demand, does not 
exonerate any party to it. There are certain other things 
which will also excuse both presentment and notice. The 
presentment of a bill of exchange for acceptance is ex- 
cused if the drawee has not capacity to accept it ; if, for 
instance, the drawee, at the time when presentment should 
be made, is insane, his capacity to make any contract is 
gone, and the law will not require presentment to him 
under such circumstances. Presentment of a bill of ex- 
change for acceptance or payment, and also notice of its 
dishonor, are excused as to the drawer, if he forbids the 
drawee to accept or the acceptor to pay the bill ; or if, at 
the time of drawing, he had no reason to believe that the 
drawee would accept or pay it. 

Civil Code, Sections 3211, 3212, 3213, 3214, 3218, 
3220. 

Section 656.— FOREIGN BILLS.— A bill of exchange 
drawn and payable within the State is an inland bill. All 
others are called foreign bills of exchange. 

Section 657.-r-PROTEST OF FOREIGN BILL OF 

EXCHANGE.— Notice of the dishonor of a foreign bill 
of exchange can be given only by notice of its protest. 
Protest must be made by a Notary Public, if with reason- 
able diligence one can be obtained ; and if not, then by any 
reputable person, in the presence of two witnesses. 



350 BUSINESS LAWS FOR BUSINESS MEN. 

Protest must be made by an instrument in writing, giv- 
ing a literal copy of the bill of exchange, with all that is 
written thereon, or annexing the original ; stating the pre- 
sentment, and the manner in which it was made ; the pres- 
ence or absence of the drawee or acceptor, as the case may 
be; the refusal to accept or to pay, or the inability of the 
drawee to give a binding acceptance ; and in case of refusal, 
the reason assigned, if any; and, finally, protesting against 
all the parties to be charged. 

A protest for non-acceptance must be made in the city 
or town in which the bill is presented for acceptance, and 
a protest for non-payment in the city or town in which it 
is presented for payment. 

A protest must be noted on the day of presentment, or 
on the next business day; but it may be written out at 
any time thereafter. 

The want of a protest of a foreign bill of exchange, or 
delay in making the same, is excused in like cases with 
the want or delay of presentment. 

Notice of protest may be given b}^ the Notary who makes 
the protest, and served as follows: (i) By delivering it to 
the party to be charged, personally, at any place ; or, (2) 
By delivering it to some person of discretion at the place 
of residence or business of such party, apparently acting 
for him ; or, (3) By properly folding the notice, directing 
it to the party to be charged, at his place of residence, 
according to the best information that the person giving 
the notice can obtain, depositing it in the post-office most 
conveniently accessible from the place where the present- 
ment was made, and paying the postage thereon. 

If a foreign bill of exchange on its face waives protest, 
notice of dishonor may be given to any party to it, in like 
manner as of an inland bill; but if any indorser expressly 
requires protest to be made, by a direction written on the 
bill at or before his indorsement, protest must be made, 
and notice of protest must be given to him and to all sub- 
sequent indorsers. 



busine:ss contracts and lkgal obligations. 351 

One who pays a foreign bill of exchange for honor must 
declare, before payment, in the presence of a person author- 
ized to make protest, for whose honor he pays the same, 
in order to entitle him to reimbursement. 

Civil Code, Sections 3227, 3228, 3229, 3230, 3233. 

Section 658.— DAMAGES ALLOWED ON DIS- 
HONOR OF BILL OF EXCHANGE.— Damages are al- 
lowed, as a full compensation, for interest accrued before 
notice of dishonor, re-exchange, expenses, and all other 
damages, in favor of holders for value only, upon bills of 
exchange drawn or negotiated within this State, and pro- 
tested for non-acceptance or non-payment. The rate of 
damages allowed by the law of California, on dishonor of 
a foreign bill of exchange, is as follows: (i) If drawn upon 
any person in this State, two dollars upon each one hundred 
dollars of the principal sum specified in the bill; (2) If 
drawn upon any person out of this State, but in any of 
the other States west of the Rocky Mountains, five dollars 
upon each hundred dollars of the principal sum specified 
in the bill ; (3) If drawn upon any person in any of the 
United States east of the Rocky Mountains, ten dollars 
upon each hundred dollars of the principal sum specified 
in the bill; (4) If drawn upon any person in any place in 
a foreign country, fifteen dollars upon each hundred dollars 
of the principal sum specified in the bill. 

From the time of notice of dishonor and demand of 
payment, lawful interest is allowed upon the aggregate 
amount of the principal sum specified in the bill, and the 
damages mentioned in the preceding paragraph. 

If the amount of a protested bill of exchange is expressed 
in money of the United States, damages are estimated upon 
such amount without regard to the rate of exchange. 

If the amount of a protested bill of exchange is expressed 
in foreign money, damages are estimated upon the value 
of a similar bill at the time of protest, in the place nearest 



352 BUSINESS LAWS FOR BUSINESS MEN. 

to the place where the bill was negotiated, and where such 
bills are currently sold. 

Assignment for Benefit of Creditors 

Section 659.— ASSIGNMENT BY INSOLVENT 

DEBTOR. — An insolvent debtor may in good faith execute 
an assignment of his property in trust for the benefit of 
his creditors and the satisfaction of their claims. Every 
assignment must be in writing, and must contain a list of 
the names of the creditors of the assignor, and their places 
of residence and amounts of their respective demands, and 
the amounts and nature of any security therefor, and must 
be made to the Sheriff of the county, or city and county, 
wherein the assignor resides, if the assignor resides within 
this State ; or in case the assignor resides out of this State, 
then to the Sheriff of the county, or city and county, 
wherein the property assigned, or some of it, is situated; 
but when, the assignor resides out of the State, an assign- 
ment may, by its terms, transfer any property of the as- 
signor in this State. The Sheriff must take possession of 
all the property so assigned to him. When the assignment 
has been made, the Sheriff must immediately, by -mail, notify 
the creditors named in the assignment, at their places of 
business or residence as given therein, to meet at his office 
on a day and hour to be appointed by him, of not less than 
eight nor more than ten days from the date of the delivery 
of the assignment to him, for the purpose of electing one 
or more assignees, as they may determine, in the place and 
stead of the Sheriff, and must also publish a notice of such 
meeting, and the purpose thereof, at least once before such 
meeting, in some newspaper published in his county, or 
city and county. The notice so to be mailed must also 
contain a statement of the amount of the demand of the 
creditor, and the amount and nature of any security there- 
for, as set forth in the assignment ; and if any creditor 
shall not find the amount of his claim to be correctly so 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 353 

stated, he may file with the Sheriff, at or before such meet- 
ing, a Statement, under oath, of his demand, and such state- 
ment shall, for the purpose of voting, be accepted by the 
Sheriff as correct; and when no such statement is filed, 
the statement of amount as set forth in the assignment 
must be accepted by the Sheriff as correct. No creditor 
having a mortgage or pledge of real or personal property 
of the debtor, or lien thereon, for securing the payment 
of a debt owing to him from the debtor, shall be allowed 
to vote any part of his claim at such meeting of creditors, 
unless he shall have first conveyed, released, or delivered 
up his security to the Sheriff, for the benefit of all creditors 
of the assignor. At such meeting, the Sheriff must preside, 
and a majority in amount of demands present or repre- 
sented by proxy must control all questions and decisions. 
The creditors may adjourn the meeting from time to time, 
and may vote on all questions, either in person, or by 
proxy, signed and acknowledged before any officer author- 
ized to take acknowledgments, and filed with the Sheriff. 
At the meeting, the creditors may elect one or more as- 
signees from their own number, in the place and stead of 
the Sheriff, and the person or persons so elected shall after- 
ward be the assignee or assignees ; and the Sheriff, by 
transfer in writing, must at once assign to such elected as- 
signee or assignees all the property so assigned to him, 
and deliver possession thereof. The Sheriff, before the 
delivery of the assignment, must be paid the expenses in- 
curred by him, and fees in such amount as would by law be 
collectible if the property assigned had been levied upon 
and safely kept under attachment. Thereupon such elected 
assignee or assignees shall take, and hold, and dispose of 
all such property, and its proceeds, for the benefit of the 
creditors of the debtor. 

Civil Code, Section 3449. 

Section 660.— WHAT IS INSOLVENCY.— A debtor is 
insolvent, within the meaning of the law, when he is unable 

23 



354 BUSINESS LAWS FOR BUSINESS MEN. 

to pay his debts from his own means, as they become due. 
But a person, although insolvent, is not prevented by the 
law from transferring, and may lawfully transfer property 
in this State to a particular creditor or creditors, for the 
purpose of paying or securing a debt due, provided the 
transfer is made in good faith. 

Section 66i.— VOID ASSIGNMENT.— An assignment 
for the benefit of creditors is void against any creditor of 
the assignor not assenting thereto, in the following cases : 
(i) If it give a preference of one debt or class of debts 
over another; (2) If it tend to coerce any creditor to re- 
lease or compromise his demand; (3) If it provide for the 
payment of any claim known to the assignor to be false 
or fraudulent, or for the payment of more upon any claim 
than is known to be justly due from the assignor; (4) If 
it reserve any interest in the assigned property, or in any 
part thereof, to the assignor, or for his benefit, before all 
his existing debts are paid; (5) If it confer upon the as- 
signee any power which, if exercised, might prevent or 
delay the immediate conversion of the assigned property to 
the purposes of the trust ; (6) If it exempt him from liability 
for neglect of duty or misconduct. 
Civil Code, Section 3457. 

Section 662.— INVENTORY TO BE MADE BY 
DEBTOR. — Within twenty days after making an assign- 
ment for the benefit of his creditors, the debtor must make 
and file, in the ofiice of the County Recorder of the county 
in which he resided at the date of the assignment, a full 
and true inventory showing: (i) All the creditors of the 
assignor; (2) The place of residence of each creditor, if 
known to the assignor ; or, if not known, that fact must 
be stated ; (3) The sum owing to each creditor, and the 
nature of each debt or liability, whether arising on written 
security, account, or otherwise ; (4) The true consideration 
of the liability in each case, and the place where it arose ; 



UUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 355 

(5) Every existing judgment, mortgage, or other security 
for the payment of any debt or HabiHty of the assignor; 

(6) All property of the assignor at the date of the assign- 
ment, which is exempt by law from execution ; and, (7) All 
of the assignor's property at the date of the assignment, 
both real and personal, of every kind, not so exempt, and 
the encumbrances existing thereon, and all vouchers and 
securities thereto, and the value of such property accord- 
ing to the best knowledge of the assignor. 

The inventory must be sworn to by the assignor. 
Civil Code, Section 3461. 

Section 663.— FAILURE TO FILE INVENTORY.— 

A failure on the part of a debtor to make and file the 
inventory mentioned in the last Section does not render 
the assignment void. The law provides that if the debtor 
fails in his duty to file the inventory, the assignees may 
make and file for record a verified inventory of all assets 
received by them ; and the court, on petition of the assignee, 
will compel the debtor to appear and be examined relative 
to all matters embraced in the assignment, and will also 
compel him to bring with him into court all his books, 
vouchers, and papers relating to the assigned property. 
The court will then have power to order the surrender of 
the books, papers, and vouchers to the assignee, to be re- 
tained by him until his trust is fully completed and per- 
formed. 

Section 664.— EFFECT OF FAILURE TO RECORD 

ASSIGNMENT.— An assignment for the benefit of credit- 
ors is void against creditors of the assignor, and against 
purchasers and encumbrancers in good faith and for value, 
unless it is recorded, and unless either the inventory re- 
quired of the assignor, or the inventory required of tlie 
assignee or assignees, is filed in the- manner provided by 
law. 

Civil Code, Section 3465. 



356 BUSINESS LAWS P^OR busine:ss men. 

Section 665.— BOND OF ASSIGNEE.— No bond is 
given by the Sheriff, but he is Hable on his official bond 
for the care and custody of the property while in his pos- 
session. Within forty days after the date of the transfer by 
the Sheriff, the assignee must enter into a bond, in such 
amount as may be fixed by a judge of the Superior Court 
of the county, or city and county, in which an inventory 
is filed, with sufficient sureties to be approved by such 
judge, and conditioned for the faithful discharge of the 
trust and the due accounting for all moneys received by 
the assignee, which bond must be filed in the same office 
with the inventory; and any assignee failing to give such 
bond may be removed by the Superior Court on petition 
of the assignor or any creditor, and his successor may be 
appointed by the court. 

Civil Code, Section 3467. 

Section 666.— ACCOUNTING BY ASSIGNEE.— After 

six months from the date of an assignment for the benefit 
of creditors, the assignee may be required, on the petition 
of any creditor, to account before the Superior Court of 
the county where the inventory was filed. The assignee's 
account, when rendered, must make a full and true showing 
of all his acts with relation to the property assigned to him. 

Section 667.— PROPERTY EXEMPT FROM AS- 
SIGNMENT. — Property exempt from execution, and in- 
surance upon the life of the assignor, do not pass to the 
assignee by a general assignment for the benefit of credit- 
ors, unless the instrument specially mentions them, and 
declares an intention that they shall pass thereby. 
Civil Code, Section 3470. 

Section 668.— COMPENSATION OF ASSIGNEE.— 

The assignee is entitled to a reasonable compensation for 
his services, and also to all necessary expenses incurred 
by him in the management of his trust. 



BUSINESS CONTRACTS AND LEGAL OBLIGATIONS. 6Di 

Section 669.— ASSIGNEE PROTECTED FOR ACTS 
DONE IN GOOD FAITH.— The assignee is protected for 
acts done in good faith, and will not be held liable for such 
acts if the assignment is afterward declared by a court to 
be void. 

Section 670.— ASSIGNMENT NOT REVOCABLE.— 

An assignment for the benefit of creditors, which has been 
executed and recorded so as to transfer the property to 
the Sheriff, or a transfer by the Sheriff to the elected as- 
signee or assignees which has been executed and recorded, 
cannot afterward be modified or canceled by the parties 
without the consent of the assignor and of every creditor. 
Civil Code, Section 3473. 

Section 671.— CREDITOR'S CLAIMS.— Notice to the 
creditors must be published by the assignee, and a copy 
mailed by him to each creditor, and the creditors must 
prove their claims ; and after the expiration of thirty days 
from the first publication of the notice, the assignee may, 
in his discretion, declare and pay dividends to the creditors 
whose claims have been presented and allowed. No divi- 
dend already declared shall be disturbed by reason of 
claims being subsequently presented and allowed ; but the 
creditor presenting such claim shall be entitled to a dividend 
equal to the per cent already declared and paid before any 
further dividend is made ; provided, however, that there be 
assets sufficient for that purpose ; and provided, that the 
failure to present such claim shall not have resulted from 
his own neglect, and the creditor shall attach to such claim 
a statement, under his oath, showing fully why it was not 
before presented. 

Section 672.— CREDITOR HOLDING MORTGAGE 
OR PLEDGE. — When a creditor has a mortgage, or a 
pledge of personal property of the debtor, or a lien thereon 
as security for the payment of a debt due him from the 



358 BUSINESS LAWS FOR BUSINESS MEN. 

debtor, and shall- not have conveyed, released, or delivered 
up such security to the Sheriff, he shall be admitted as a 
creditor only for the balance of the debt, after deducting 
the value of such mortgage, pledge, or lien, to be ascer- 
tained by agreement between him and the assignee, or by 
a sale thereof, to be made in such manner as the Superior 
Court of the county in which the assignment is made shall 
direct; or the creditor may release or convey his claim 
to the assignee upon such property, and be admitted to 
prove his whole debt. If the value of the property ex- 
ceeds the sum for which it is so held as security, the 
assignee may release to the creditor the debtor s right of 
redemption on receiving such excess; or he may sell the 
property, subject to the claim of the creditor ^ and in either 
case the assignee and creditor, respectively, shall execute 
all deeds and w^ritings necessary or proper to consummate 
the transaction. If the property is not sold or released, 
and delivered up, the creditor will not be allowed to prove 
any part of his debt. 



PART II 



COLLECTION OF BILLS AND ACCOUNTS 

Section 673.— METHODS OF MAKING COLLEC- 
TIONS. — Custom will control to a great extent the meth- 
ods of making collections in force in different localities, 
but whether collections be made monthly, quarterly, semi- 
annually, or annually, there are certain provisions of the 
law of the State which apply to all methods, and which 
must constantly be kept in mind. Whether a creditor col- 
lects his bills monthly, or at longer intervals of time, the 
law leaves to his own choice. The parties may contract for 
payment at any time or place, and the law will enforce the 
contract. 

Section 674.~PRESENTMENT OF BILLS OR 
STATEMENTS OF ACCOUNT.— The debtor is entitled 
to have a bill or statement of account, showing the claim 
of his creditor. This is usual in every business, and it is 
more necessary in commercial affairs than in any other, for 
the book accounts of sales of merchandise, and other similar 
commercial transactions, are usually kept by the creditor 
alone. 

Section 675.— ITEMIZED ACCOUNT.— When a bill 
has been presented which is not itemized, the debtor lias 
a right to demand of the creditor an itemized account, show- 
ing in detail all the items of the claim presented to him. 

Section 676.— OPEN AND CURRENT ACCOUNT.— 

An open account is an account where no balance has been 
struck. Until a balance is struck, even though there have 

(359) 



360 BUSINESS LAWS rOR BUSINESS MEN. 

been mutual dealings between the parties, the account is 
open and current. 

Section 677.— WHEN OPEN ACCOUNT OUTLAWS. 

— An open account will outlaw in two years. That is, if 
there is a claim, for goods purchased, for instance, upon 
an open account, all items dating back more than two years 
will be outlawed, and in a suit for the amount of the bill 
the plaintifif cannot recover for any item more than two 
years old. So, in a suit for work or labor performed by the 
day or month, where there has not been a mutual account, 
no part can be collected except for the work done within 
two years. 

Section 678.— MUTUAL ACCOUNT.— To constitute a 
mutual account there must be reciprocal demands. An 
account is mutual when each party makes charges against 
the other in his books for property sold, service performed, 
or money loaned or advanced. A payment on account wall 
not make the account mutual. Mutual accounts are only 
where each party has a demand or right of action against 
the other. Thus, where a merchant sells a farmer goods, 
and the latter sells and delivers to the merchant, hay, grain, 
or a horse, or any other article of personal property, in the 
ordinary course of business, he has a demand against the 
merchant, and the merchant has a demand against him, 
and thus the account between them is a mutual account. 
In the course of mutual dealings between parties, the bal- 
ance due may sometimes be on the one side and sometimes 
on the other, and in the ascertainment of the state of ac- 
count, each may use his own demands as set off against 
that of the other until the less is exhausted by the greater. 
Where it appears, first, that the account between the parties 
consists of reciprocal demands ; second, that the account is 
open ; and third, that the account consists of different item^s 
of different dates ; it is then said to be a mutual, open, and 
current account. 



COLLECTION OF BILLS AND ACCOUNTS. 361 

Section 679.— WHEN MUTUAL ACCOUNT OUT- 
LAWS. — A suit may be brought on a mutual account at 
any time within two years from the date of the last item- 
proved in the account on either side. When any item of 
a mutual account is within the two years, none of the ac- 
count is outlawed, though some of the items may be more 
than two years old. 

Code of Civil Procedure, Sections 339, 344. 

Section 680.— STATED ACCOUNT.— An account stated 
is where an account is balanced and rendered, and the 
person to whom it is rendered assents to it as being a cor- 
rect statement of the balance due, and agrees to pay it. 
The stated account is usually in writing, but under cer- 
tain circumstances it may be verbal. Where there is an 
open account, and the parties meet and agree orally before 
any portion of the account is outlawed upon the balance 
that is due, and there is an agreement to pay such balance, 
this will be good as an account stated. The assent to an 
account stated by the person to whom it is rendered may 
be expressly and directly given, or such assent may be in- 
ferred from circumstances. If the person receiving the 
statement makes no objection to it, and holds it for a long 
time apparently satisfied with it, his assent to it will be 
inferred. 

Section 681.— WHEN STATED ACCOUNT OUT- 
LAWS. — When the parties have stated and adjusted their 
accounts, and thus ascertained the balance, what was be- 
fore an implied promise to pay what was reasonable, by 
such adjusting and stating of accounts, at once becomes 
an expressed promise to pay a sum certain. Therefore, in 
a suit to recover the amount due, the items of the original 
account are no longer referred to. The account is at an 
end, in fact. The parties have agreed upon a balance due, 
which one has promised to pay the other. The right to 
commence a suit for the amount due, upon a stated account. 



362 BUSINi:SS LAWS ^OR BUSINESS MEN. 

runs two years after the time when the account was stated, 
and if suit is not commenced within two years, the debt 
will be outlawed. 

Section 682.— INTEREST ON A STATED ACCOUNT. 

— The uniform custom of a merchant or manufacturer is 
presumed to be known to those who are in the habit of deal- 
ing with him, and in their dealings they are supposed to 
act with reference to that custom. When it is the uni- 
versal custom of a merchant to charge interest after thirty 
days upon monthly balances due upon open accounts, and 
where such an account showing the interest charged up 
regularly is received by the debtor and fully understood 
by him, and where such account becomes stated, either by 
the prolonged failure of the debtor to object or by a set- 
tlement between the parties, the debtor is bound to pay 
the balance found due, including the interest charged. 

Section 683.— ASSIGNMENT FOR COLLECTION.— 

An open account, a mutual account, or an account stated, 
may be assigned to a third person for collection. No money 
need be paid for the assignment. The consideration will 
be sufficient to sustain the assignment, if the person to 
whom the account is assigned undertakes on his part to 
make collection. If the assignee brings suit on the account, 
and the debtor makes the defense that there was no con- 
sideration for the assignment, it will be a sufficient answer 
to that defense to show that the account was assigned for 
collection. 

Section 684.— ASSIGNEE MAY SUE IN HIS OWN 
NAME. — The assignee for collection may bring the suit in 
his own name. The law of California provides that every 
suit must be brought in the name of the real party in inter- 
est ; but the assignee for collection must contribute his labor 
and services, and his presumed undertaking and promise to 
do so is a sufficient consideration for the assignment to 
enable him to sue in his own name. 



COLLECTION OF BILLS AND ACCOUNTS. 36c> 

Section 685.— ASSIGNMENT MAY BE VERBAL OR 
WRITTEN. — The assignment of an account, open, mutual, 
or stated, may be made verbally or in writing. It is usual 
to make such assignments in writing, because this of itself 
affords documentary proof of the assignment; but a verbal 
assignment will be sufficient, where the proof is conclusive. 

Section 686.— ASSIGNMENT BY ONE PARTNER OF 
PARTNERSHIP ACCOUNT.— One partner may make 
an assignment of a partnership account, in the name of 
the firm, and the assignment will be good. It is of no con- 
sequence to the debtor, as it in no respect affects his lia- 
bility, whether the assignment was made at one time or 
another, or with or without consideration, or by one or 
by all the members of the firm. One member of a firm 
may even assign a partnership claim, in the name of the 
firm, to himself individually, and this will be sufficient to 
enable him to sue on it, if the other partners do not object. 
The other partners making no objections, the debtor will 
not be allowed to do so. 

Section 687.— COLLECTION OF ACCOUNTS V/HEN 
BOOKS ARE LOST.— Though the books in which the 
accounts were kept are lost, from whatever cause, by fire, 
or theft, or by being mislaid, yet the accounts can be col- 
lected, if they can be proved in some other way. First, the 
loss of the books of original entry must be shown, and 
diligent search to find them ; then, the accounts may be 
proved by producing other books into which they were 
copied from the original entry book, or, if none such exist, 
by the verbal testimony of bookkeepers, agents, clerks, 
proprietors, or any one who may know what the accounts 
consisted of. 

Section 688.— WHAT DEBTOR MAY SET OFF 
AGAINST ASSIGNED ACCOUNT.— When the assignee 
of an account sues to recover the amount due, the debtor 



364 BUSINESS LAWS FOR BUSINESS MEN. 

may set off against the claim any claim which he had 
against the creditor himself at the time of the assignment, 
or before notice to him of the assignment. But his claim 
must be one upon which he could have maintained an in- 
dependent action, and be one of contract ; for he could not, 
in a suit against him upon an account, brought by either 
the creditor or his assignee, defend by setting up a demand 
for damages for a wrong suffered by him. 

Code of Civil Procedure, Section 368. 

Section 689.— AUTHORITY OF AGENT IN MAKING 
COLLECTIONS.— The authority of agents in making 
collections will be equal to the power actually or ostensibly 
delegated to them by the principal. If the debtor is in- 
formed by the creditor that a certain person or a bank is 
his agent to make collections, there can seldom be any 
danger in inferring full and extensive authority on the part 
of the agent to do everything necessary in and about the 
collection. But it often happens that the authority of the 
agent, and the extent of his powers, must be ascertained, 
not by any direct communication from the creditor, but 
from a long-continued course of dealing or custom of trade. 
If an agent for collection has been in the habit of collect- 
ing in a certain manner, or of making discounts upon cer- 
tain accounts, or has collected regularly for the same firm 
or person at a particular place for a long time, these facts 
being known, it will be presumed that he has authority 
from his principal coextensive with his acts. 

Section 690.— RATIFICATION OF AGENT'S ACTS. 

— Even though one who represents himself as an agent to 
make collections really has no such authority, the creditor 
for whom the collection is made may so conduct himself 
as to create a ratification of the agent's acts. Thus, if he 
receives the proceeds from the agent, or knows of the man- 
ner of collection and makes no objection, or in any way 
leads the debtor to believe that he is satisfied with the 



COLL]<;CTION OF BILLS AND ACCOUNTS. 365 

agent's conduct, he will be deemed to have ratified the acts 
of the agent, and thus bind himself. 

Section 691.— AGENT'S COMMISSIONS UPON COL- 
LECTIONS. — The law leaves the agent's commissions 
upon collections made by him to be regulated by the agree- 
ment of the parties. But if a creditor sends a bill or ac- 
count to an agent, with instructions to collect the same 
from the debtor, and the agent proceeds to make the col- 
lection, and nothing is said about the agent's compensation, 
there will be an implied obligation on the part of the cred- 
itor to pay the agent a reasonable commission. What is 
a reasonable commission will depend upon circumstances,* 
taking into consideration the nature of the collection, the 
amount of labor and skill employed, and the amount usually 
paid, if there is any custom, for such collections in the 
particular locality or business. 

Section 692.— COLLECTION OF BILLS AND AC- 
COUNTS WHEN DEBTOR IS DEAD.— When the 
debtor is dead, a claim upon the account must be presented 
to his Administrator or Executor, within four months from 
the first publication of notice to creditors, if the estate is 
appraised at less than $10,000, or within ten months from 
the first publication of notice to creditors, if the estate is 
appraised at $10,000 or over. The claim must be allowed 
and approved by the Administrator or Executor and the 
Judge of the Superior Court. If the claim is not allowed, 
the creditor can then sue the Administrator or Executor, 
as the case may be. 

Section 693.— SUIT IN JUSTICE COURT ON BILLS 
AND ACCOUNTS.— A suit to collect the amount of a bill 
or account must be brought in the Justice Court, when the 
amount is less than $300, exclusive of interest. 



3B6 BUSINESS LAWS FOR BUSINESS MEN. 

Section 694.— IN WHAT TOWNSHIP SUIT MUST 
BE BROUGHT.— If the money is to be paid at a certain 
place, then the suit may be brought in the township and 
county where the place of payment is situated. But if 
goods are sold in San Francisco to a person in Ukiah^ and 
the bill is to be paid at Ukiah, then the creditor must sue 
in the Justice Court in Ukiah Township. If the bill is to 
be paid at San Francisco, the suit may be brought in the 
Justice Court there. If there is no agreement as to where 
the obligation to pay is to be performed, then the suit must 
be brought in the township and county where the debtor 
resides. 

Section 695.— SUIT IN SUPERIOR COURT ON 
BILLS AND ACCOUNTS.— If the bill amounts to $300 
or more, exclusive of interest, a suit to collect the amount 
due must be commenced in the Superior Court. However, 
the creditor may waive all the excess of his claim, and sue 
in the Justice Court for a sum less than $300, exclusive of 
interest, thus remitting to the debtor all of the account 
exceeding the amount sued for. 

Section 696.— IN WHAT COUNTY SUIT IN SU- 
PERIOR COURT MUST BE BROUGHT.— The same 
rule applies to suits in the Superior Court as obtains in the 
matter of Justice Court suits. That is, where there is no 
place agreed upon for the performance of the debtor's obli- 
gation to pay, the debtor has a right to have the suit tried 
in the Superior Court of the county where he resides ; but 
if the bill is to be paid where the creditor resides, or at 
some other place, the suit may be tried there. The creditor 
may bring his suit in the Superior Court of the county 
where he lives or has his place of business, in any event, 
and the suit will be tried there, unless the debtor appears 
and moves for the transfer of the case to the Superior 
Court of the county of his own residence. 



COLLECTION 01' BILLS AND ACCOUNTS. 367 

Section 697.— ATTACHMENT OF DEBTOR'S PROP- 
ERTY IN SUIT TO COLLECT ACCOUNT.— What 
property of the debtor is the subject of attachment, to 
secure the collection of an account, in a suit by the creditor 
or his assignee, and what property is exempt from attach- 
ment and execution, will be found fully stated in Part IV, 
under the head of ''Attachments and Executions." 

Section 698.— MEANS FOR COLLECTION TO BE 
EMPLOYED BY AGENT.— Authority of an agent to col- 
lect implies and includes the right on his part to use all the 
ordinary means for collection, and among these are the 
employment of attorneys and the commencement of suits. 

Section 699.— PAYMENT TO WIFE OF CREDITOR. 

— Where a man's wife is in the habit of transacting busi- 
ness for him, receiving and paying out money for him with 
his consent, payment to her of a debt due him in his pres- 
ence, without objection from him, is a payment to him. 

Section 700.— PAYMENT OF NOTE TO SUPPOSED 
AGENT. — A party who in good faith makes payments upon 
a promissory note to one whom he has reason to believe is 
the authorized agent of the holder thereof, and whose acts 
in receiving such payments have come to the knowledge 
of the holder, and have not been repudiated by him, can- 
not be held for the money so paid to the agent. 

Section 701.— TAKING GOODS FOR CREDITOR'S 
CLAIMS. — Where creditors, after receiving an offer of a 
bill of sale from their debtor, assign their claims to a col- 
lecting agent fof the purpose of conducting the transaction, 
with authority "to take the goods in full of the creditor's 
claims," the agent has authority to agree with the debtor 
that the sale shall be conditional, and that the goods will 
be surrendered to him, when enough is realized from the 
sales to satisfy the claim. 



368 busine:ss laws for busine:ss mi:n. 

Section 702.— ACCEPTING PROMISSORY NOTE.— 

Under authority to settle with the debtor, and take any- 
thing he can get, an agent has power to accept a promissory 
note. 

Section 703.— COLLECTION OF NOTES BY AGENT. 

— Authority given an agent to collect money, due on a note 
and mortgage, is not authority to the agent to accept a con- 
veyance of the mortgaged premises in payment. 

One who holds a note for collection cannot, without 
authority from the payee, agree to discharge one of the 
joint makers upon payment by him of a part of the sum 
due. 

Although a mortgagee has authorized an agent to col- 
lect interest and to receive payment of the principal when 
due, the agency does not extend to receiving payment of 
principal before maturity. 

The existence of an agent's authority to receive payment 
of notes may be inferred from the mutual conduct and rela- 
tions of the parties, or from the general nature of the trans- 
actions in which they are concerned and the circumstances 
surrounding them. 



PART III 

NOTES AND MORTGAGES 

Promissory Notes 

Section 704.— WHAT IS A PROMISSORY NOTE.— 

The statute law of California defines a promissory note to 
be "an instrument negotiable in form, whereby the signer 
promises to pay a specified sum of money." But, while it 
is defined as an instrument "negotiable in form,'' it may 
be not negotiable, and still be a promissory note. And the 
law of the State, as well as the rules of commercial busi- 
.ness, recognizes two classes of promissory notes, negotiable 
and non-negotiable. The difference between these two 
classes, — what constitutes a negotiable note, and what is 
meant by a non-negotiable note, — will be found stated 
further on, in other Sections. 

Civil Code, Section 3244. 

Section 705.— WHO MAY BE PARTIES.— All per- 
sons capable of entering into a contract may be parties to 
a promissory note, and be bound by it. And all persons 
in Calffornia are capable of contracting except minors, per- 
sons of unsound mind, and persons deprived of civil rights. 
A minor in California is a male under the age of 21 years, 
or a female under the age of 18 years. A minor under the 
age of 18 cannot make a contract relating to real property, 
or relating to any personal property not in his immediate 
possession or control ; but he may make any other contract 
in the same manner as an adult, subject to certain condi- 
tions, stated in the next .Section. A person of unsound 
mind, entirely without understanding, as an idiot or luna- 
tic, has no power to make a contract of any kind ; but a 
24 (369) 



370 BUSINESS LAWS FOR BUSINi:SS MEN, 

contract may be made by a person of unsound mind who 
is not entirely without understanding, such a contract, how- 
ever, being subject to be set aside in court. A person 
deprived of civil rights is not capable of making a con- 
tract while in that condition. A person is deprived of civil 
rights when he is sentenced to imprisonment in the State 
Prison for life, and his civil rights are suspended during 
the term when he is sentenced for a term less than life. 
A convict may, however, make and acknowledge a sale and 
conveyance of property. 

Civil Code, Sections 1556, 33, 34, 38, 39; Penal 
Code, Sections 673, 674, 675. 

Section 706.— NOTE MADE BY MINOR.— A minor 
may make a promissory note at any time before he comes 
of age. But, if he does make a promissory note while under 
the age of 18 years, he may disown and repudiate it, either 
before he comes of age or within a reasonable time after- 
wards, by giving notice that he disaffirms it. If he dies 
before coming of age, his heirs or executors have a right 
to disown and repudiate the note. No part of a note made 
by a minor under the age of 18 years can be collected, if 
he repudiates and disaffirms it before he reaches his major- 
ity, or within a reasonable time afterwards. If a minor 
over 18 years of age makes a note, he may likewise repu- 
diate and disaffirm it, before becoming of age or within 
a reasonable time afterwards, but he must restore the con- 
sideration to the party from whom it was received. Thus, 
if a young man, over the age of 18 and under 21 years of 
age, borrows a sum of money, and makes his note as secur- 
ity, he may disown and repudiate the contract in the manner 
before stated, but he must return to the lender the money 
he actually received. The reason of the distinction between 
the contracts of minors under the age of 18 and the con- 
tracts of minors over 18 years is this, that a minor under 
the age of 18 is presumed not to have arrived at an age 
of judgment and discretion sufficient to protect him from 



NOTES AND MORTGAGES. 37] 

the schemes of those who might take advantage of his 
infancy to defraud him ; and all persons who enter into 
a contract with a minor under the age of i8 must do so 
at the peril of having such a contract absolutely disowned 
and disaffirmed. 

Civil Code, vSection 35. 

Section 707.— NOTE MADE TO MINOR.— A prom- 
issory note may be made to a minor, and he takes it sub- 
ject to the same right to disaffirm the contract as he pos- 
sesses with relation to a note made by him. If he takes 
a note made to himself, and does not give notice of disaf- 
firmance to the maker, before he attains his majority or 
within a reasonable time afterwards, the maker will be 
bound, and the note can be collected. Also, a minor who 
takes a note made to himself may transfer it by indorse- 
ment to another, and the person to whom he indorses the 
note can collect it, unless after indorsement the minor gives 
notice to the maker that he disaffirms and repudiates the 
note. In other words, the person to whom a minor in- 
dorses a note will take it subject to the right of the minor 
to disaffirm it. 

Section 708.— NOTE MADE BY MARRIED WOMAN. 

— Under the laws of California, married women have many 
rights which they never had in other countries. In this 
State a married woman may enter into any contract with 
any person, respecting property, which she might do if 
unmarried. She may buy or sell, lease or mortgage, lend 
or borrow, in her own name and on her own account. It 
follows, as a matter of course, that a note made by a 
married woman is a valid and binding obligation, for she 
has the right to make it. But a note made by a married 
woman, and signed by her alone, can only be collected out 
of her separate property. The community property be- 
longing to the husband and wife is not liable for the con- 
tracts of the wife made before marriage. The separate 



372 BUSINESS LAWS FOR BUSINESS MEN. 

property of the wife, out of which alone a note made by 
her can be collected, includes all property which she ow^ned 
before marriage, and all property which she acquires after 
marriage by gift, or by will, or by descent to her as heir, 
and the rents and profits of such property. If a note made 
by a married woman is sued on, the judgment can only 
be enforced against her separate property. A married 
woman may contract with her husband as well as with 
others, and a valid note may be made by her to him. 
Civil Code, Sections 158, 162. 

Section 709.— NOTE MADE TO MARRIED WOMAN. 

— A promissory note may be made to a married woman, 
and she may collect it alone, without reference to her hus- 
band, if it relates to her separate property. She may 
legally take a promissory note from her husband, as well 
as from others. She may sue in her own name to collect 
a note made to her, if it concerns her separate property, 
and her husband need not be a party to the suit. 
Code of Civil Procedure, Section 370. 

Section 710.— NOTE MADE BY CORPORATION.— 

A promissory note may be made by a corporation, as well 
as by a natural person. But there are certain necessary 
requisites to the validity of a note made by a corporation 
which do not exist in the case of a natural person. While 
a man may act as his own individual will shall dictate, a 
corporation, being a creature without a soul, can only act 
by means of agents. These agents may have general 
powers delegated to them, which serve for all occasions, 
or they may have special powers given them, for a certain 
prescribed purpose. In either case, many important ques- 
tions frequently arise as to the power of its agents to bind 
a corporation. A corporation is usually managed and con- 
trolled by a Board of Directors, having under them, and 
subject to their directions, certain officers or other agents. 
In California, the Board of Directors of a corporation may 



NOTES AND MORTGAGES. 373 

consist of a number, not less than five, or any larger number, 
selected from among the members or stockholders. A ma- 
jority of the Board constitutes a quorum. Unless a quorum 
of the Board of Directors is present and acting, no busi- 
ness performed is valid as against the corporation. The 
Directors are agents of the corporation only when they 
act as a Board. Therefore, if a corporation makes a note, 
such action must be authorized by its Board of Directors, 
a majority of the Board being present. x\ corporation must 
have a seal. It can only do the business for which it was 
organized. A corporation organized for one purpose can 
not carry on business for another purpose. In the course 
of its legitimate business, a corporation may borrow money, 
or secure a creditor, and make its note therefor. This is 
done by the vote of the Directors, at a regular meeting, 
a majority being present. A record of the votes must be 
kept, the ayes and noes being recorded. A majority of 
the Board must vote in favor of the proposition. The ex- 
ecution of the note being thus authorized, the President may 
sign the name of the corporation, affix the seal of the cor- 
poration, and deliver the note for the corporation. No 
Director must be financially interested in the transaction 
in which the note is authorized to be executed, in any way 
which conflicts with the interests of the corporation. If 
any director is so interested, and it requires his vote to 
make a majority in favor of the proposition, the action of 
the Board will not be legal, and the note will be void. 
The note must be made in the legitimate business of the 
corporation, otherwise it will be void. For instance, if the 
Directors of a banking corporation should borrow money 
to build a railroad, the building of railroads not being one 
of its purposes, the act of the Directors is outside of their 
power, and the note is invalid. Every person taking a 
note from a corporation is presumed to know the purposes 
of its organization, and is presumed to know whether the 
execution of the note was authorized as the law directs. 
Therefore the person to whom the note is made is bound 



374 BUSINESS LAWS FOR BUSINESS MliM. 

to inform himself of the facts ; for, if the note has not been 
made by legal authorization of the Directors, or if it is 
outside the power of the corporation, and not within its 
legitimate business, in a suit on the note, the corporation 
can make that defense and defeat the collection of the note. 
If a note has been made, in the manner and for a purpose 
authorized by law, the corporation is legally bound to pay it. 
And, further, each stockholder in the corporation becomes 
bound for the payment of the note. Each stockholder 
is individually and personally liable for such proportion of 
the note of the corporation as the amount of stock or shares 
owned by him bears to the whole of the subscribed capital 
stock or shares of the corporation. The liability of each 
stockholder is determined by the amount of stocks or shares 
owned by him at the time the note was made. In corpora- 
tions having no capital stock, each member is individually 
and personally liable for his proportion of the amount due 
on the note. It sometimes happens, too, that, after the 
President or other agent of the corporation has made a note 
for it, without authority lirst given, but for the legitimate 
uses and purposes of the corporation, the Directors after- 
ward ratify the act of the agent. This ratification may be 
by a resolution passed at a meeting of the Board, or it may 
occur w^here the corporation enjoys, in its proper business, 
the fruits of the transaction. In either case, the corporation 
and its stockholders or members are equally bound as when 
the note is made by previous authority. Where the trans- 
action concerning the execution of a promissory note by a 
corporation is fully entered in the books of the corporation, 
and notice thus imparted to it, and after such notice the 
corporation retains the consideration of the transaction, and 
thus accepts the benefits, it must be held to have ratified 
the transaction. (Decided by the Supreme Court of Cali- 
fornia, in the case of Curtin vs. Salmon River Hydraulic 
Gold Mining and Ditch Company, which decision is printed 
in Volume 26, California Decisions, page 949.) 
Civil Code, Sections 290, 305, 308, 322. 



NOTES AND MORTGAGES. 375 

Section 711.— NOTE MADE TO CORPORATION.— 

A note may be made to a corporation, as well as by it. 
The note should be made to the corporation by its cor- 
porate name, but a mistake in the name will not invalidate 
the note. If there is a mistake in the name of the cor- 
poration, in the note, that will make no difference, if it 
can be reasonably ascertained from the note what corpora- 
tion is intended. Having taken and received the note, the 
corporation has the same rights, with reference to its col- 
lection, as an individual would have. 
Civil Code, Section 357. 

Section 712.— NOTE MUST BE IN WRITING.— 

There is no such thing as a verbal promissory note. A 
promissory note must be in writing. 

Section 713.— NOTE MAY BE IN PENCIL.— While 
a promissory note must be in writing, such writing need 
not be in ink; it may be in pencil; and it need not be all 
in the handwriting of the maker ; for it may be printed, or 
it may be typewritten, yet if the name of the maker is 
signed to it, the note will be valid. 

Section 714.— MUST BE FOR THE PAYMENT OF 
MONEY. — A promissory note must be for the payment 
of money, and for the payment of money only. So, a writ- 
ten promise to pay money and goods, or to pay goods 
alone, is not a legal promissory note. No written promise 
to pay is a valid promissory note, unless it be for the 
payment of money, and of money only. But it may be 
made payable in the money or currency of any other coun- 
try, as w^ell as in- the money of the United States. It may 
be made payable in the money of England, or France, 
or Spain, or Holland, or Italy, or of any other country, 
and will be just as binding as though made payable in 
the coin of the United States. It may be made payable 
in coins, such as guineas, ducats, doubloons, crowns, or 



376 BUSINESS LAWS >^0R BUSINESS MEN. 

in dollars, or in pounds sterling. In the ordinary business 
transactions of this country a note is usually made payable 
in dollars, gold coin of the United States. 
Civil Code, Section 3244. 

Section 715.— MUST BE FOR A CERTAIN SPECI- 
FIED AMOUNT. — Not only must the note be for the pay- 
ment of money, but it must also be for a certain specified 
amount. The amount stated in the note must be fixed 
and certain. Therefore, if the promise be, to pay a speci- 
fied sum of money, with all other sums that may be due : 
or, to pay a specified sum of money, and the demands of 
another person; or, to pay a specified sum of money, after 
deducting allowances and expenses; in all such cases the 
instrument is void as a promissory note, because the amount 
to be paid is not fixed with certainty on the face of the 
note. The amount to be paid, however, if it be a fixed sum, 
need not be written in words, but may be expressed in 
figures. 

Civil Code, Section 3244. 

Section 716.— MUST NOT BE SUBJECT TO ANY 
CONDITION OR CONTINGENCY.— The note, to be 
valid, must not be subject to any condition or contingency 
which might defeat the promise to pay. The money must 
be payable absolutely, and must not depend upon the hap- 
pening or not happening of some event. Consequently, if 
a note is made payable provided a thing is done, or pro- 
vided a thing is not done, or which makes the payment 
depend upon any contingency or uncertainty, it is not a 
valid promissory note. 

Section 717.— FORM OF NOTE.— A promissory note 
need not be in any particular form, so long as it is cer- 
tainly to be seen on the face of it who is the maker, to 
whom it is payable, the sum to be paid, and an absolute 
promise to pay it. The most common form of negotiable 



NOTES AXn MORTGAGES. 377 

promissory note in use in California, and one which an- 
swers every purpose, is as follows : — 

, Cal., , 190. . 

after date, for value received, I promise 

to pay , or order, at , 

California, the sum of Dollars, 

Gold Coin of the United States, with interest thereon in like 

Gold Coin at the rate of per cent per annum from 

date until paid. Interest payable semi-annually, and if not 
so paid to be added to the principal and bear interest at 
the same rate until paid. 



Or the note may be made as follows : — 

, Cal., , 190. . 

One day after date, for value received, I promise to pay 

, or order, at , 

California, the sum of Dollars, Gold 

Coin of the United States, with interest thereon in like 

Gold Coin at the rate of per cent per annum from 

date until paid. Interest payable semi-annually, and if not 
so paid to be added to the principal and bear interest at the 
same rate until paid. 



Or the note may be made as follows: — 

, Cal., , 190. . 

For value received I promise to pay 

or bearer the sum of Dollars, Gold 

Coin of the United States, with interest thereon in like 

Gold Coin at the rate of per cent per annum from 

date until paid. Interest payable semi-annually, and if not 
so paid to be added to the principal and bear interest at 
the same rate until paid. 



Section 718.— TIME OF PAYMENT.— It is not abso- 
lutely necessary that a note should state the time of pay- 
ment. If it does state the time of payment, it is due on 
the day stated, or, when that day is a holiday, the next 
business day. If it does not specify the time of payment 
but merely "For value received I promise to pay," it is 
payable immediately. If the' day of payment falls on 



378 BUSINESS LAWS FOR BUSINESS MEN. 

Sunday, or Fourth of July, or Christmas, or Thanksgiving, 
or any other holiday, the note is due on the next day. 
Civil Code, Sections 3132, 3099. 

Section 719.— PLACE OF PAYMENT.— A note is valid 
which does not specify any place of payment. If the note 
specifies a place of payment, as, "At San Francisco," it 
must be paid at the place specified. If the note does not 
specify any place of payment at all, it is payable at the 
residence or place of business of the maker, or wherever 
he may be found. The holder of the note, when no place 
of payment is specified, may present it for payment at 
either the maker's residence, his place of business, or wher- 
ever he is found, at his option. 

Civil Code, Section 3100. 

Section 720.— DATE OF NOTE.— The date of a note 
need not necessarily be at the beginning. The date may 
be placed upon any part of the paper, at the top, or at the 
bottom, or anywhere else on its face, and it will be suffi- 
cient. It is not necessary to insert the true date of its 
signing. Any date may legally be inserted by the maker, 
whether past, present, or future, and the note will still be 
valid and binding. In any dispute in court the holder or 
the maker will be allowed to show the actual time when 
the note was executed or delivered, or when it was intended 
by the parties to take effect. 

Civil Code, Section 3094. 

Section 721.— NOTE NOT DATED IS VALID.— A 

note is valid although not dated at all. If it bears no date, 
it will be considered as dated at the time it was executed. 
And if the holder of a note which bears no date at all sues 
to collect it, he will be allowed to show by verbal testi- 
mony when the note was actually signed, or when it was 
intended by the parties to take effect. 
Civil Code, Section 3091. 



NOTi:S AND MORTGAGES. 379 

Section 722.— HOW MUST BE SIGNED BY MAKER. 

— The name of the maker may be affixed to any portion 
of the note, and it will be good. It may be at the begin- 
ning, or in the middle, or signed at the end. For instance, 
if a note begins, "I, John Smith, promise to pay," etc., and 
is not otherwise subscribed at all, it will be a valid note, 
because tlie intention to bind the maker is apparent. The 
maker's name may be signed in pencil. If the maker can- 
not write, his signature may be by an X, or mark, his 
name being written near the mark by another person, who 
writes his own name as a witi:ess. 
Civil Code, Section 14. 

Section 723.— FORM OF NOTE SIGNED V/ITH AN 

X. — The following is a good form for a note signed with 
an X, or mark, by a person who cannot write : — 

, Cal., , 190. . 

after date, for value received, I promise 

to pay , or order, at 

California, the sum of Dollars, Gold 

Coin of the United States, with interest thereon in like 

Gold Coin at the rate of per cent per annum from 

date until paid. Interest payable semi-annually, and if not 
so paid to be added to the principal and bear interest at 
the same rate until paid. 

his 
SAMUEL X GREEN, 
mark. 
GEORGE JONES, 

Witness to signature of Samuel Green. 

Section 724.— MAKER'S NAME SPELLED V/RONG. 

— It will make no difference in the validity of a note that 
the name of the maker is misspelled in his signature. The 
note is good if it can be determined, by the face of the 
note, or the indorsement on its back, who the maker is. 

Section 725.— NAME OF PERSON TO WHOM NOTE 
IS PAYABLE. — The payee need not be named in person, 



380 busine:ss laws for busine:ss men. 

if some one be indicated. Therefore it is sufficient if the 
note is made payable "to John Smith, or bearer,'' or "to the 
holder," or "to order," for this must be intended to mean 
whoever comes into lawful possession of it. 

Section 726.— NOTE PAYABLE ON OR BEFORE 
A CERTAIN DATE.— A note may be made payable on 
or before a certain date, and this will give the maker the 
right to pay the note at any time before the date named, 
at his option. But the holder cannot compel the maker 
to pay the note until the date named in it. Thus, if a note 
is made payable "on or before one year after date," the 
maker has a right, if he chooses, to pay the note at any 
time during the year; but the holder cannot compel him 
to pay until the year's time has expired. 

Section 727.— FORM OF NOTE PAYABLE ON OR 
BEFORE A CERTAIN DATE.— A good form of note, 
giving the maker the option of paying at any time before 
the date named, is as follows : — 

, 190- • 

On or before one year after date, for value received, I 

promise to pay , or order, at , 

California, the sum of Dollars, Gold 

Coin of the United States, with interest thereon in like Gold 

Coin at the rate of per cent per annum from date 

until paid. Interest payable semi-annually, and if not so 
paid to be added to the principal and bear interest at the 
same rate until paid. 



Section 728.— NOTE WITH PAYEE BLANK.— A 

note may be made with the payee blank, that is, with a 
blank space for the payee's name to be inserted, and it will 
be payable to bearer. It passes by delivery, and any bona 
fide holder for value may fill it up with his own name and 
sue upon it. 



NOTES AND MORTGAGES. 381 

Section 729.— NOTE PAYABLE TO ORDER OF 
MAKER. — A note may be made payable to the order of 
the maker. For instance, the note may call for payment 
"to the order of myself," and be indorsed by the maker to 
another person. The holder will take a valid note by such 
indorsement, and the maker will be bound. 

Section 730.— WHEN NOTE IS NEGOTIABLE.— 

In order for a note to be negotiable, it must be made pay- 
able to ''order,'' or to "bearer." A\^ithout these words, the 
note is not negotiable. By a negotiable note is meant an 
instrument which passes from one person to another by 
indorsement and delivery, and which, if transferred before 
it is due, entitles the holder to collect the full amount which 
its face calls for. But there must be something on the face 
of the note to indicate the intention of the parties that it 
shall be transferable by indorsement, negotiable ; and com- 
mercial custom and the law of California provide that such 
intention must be made manifest on the face of the note, by 
the use of the word ''order" or "bearer." 
Civil Code, Section 3087. 

Section 731.— WHEN NOTE IS NOT NEGOTIABLE. 

— A note which is merely made payable to a certain per- 
son, and not to "order," or not to "bearer," is not nego- 
tiable. But, besides the omission of these words of nego- 
tiability, there are other things which destroy the negotiable 
character of a note. Thus, if a note is made payable out of 
a certain specified fund, it is not negotiable; and if a note 
provides for the payment of an attorney's fee in case of 
suit for collection, it is not negotiable. 

Section 732.— DIFFERENCE BETWEEN NEGOTIA- 
BLE NOTE AND NOTE NOT NEGOTIABLE.— In the 

law of California, as applied to common business affairs, the 
essential difference between the two kinds of notes, a note 
which is negotiable and a note which is not negotiable, will 



382 BUSINESS LAWS I^OR BUSINE:SS MEN. 

be found to be this : A negotiable note passes from one to 
another by deUvery and indorsement, and may pass through 
an indefinite number of hands, and so long as it is indorsed 
for value, before becoming due, the holder acquires an 
absolute claim against the maker. The note, by being 
made payable to order, or to bearer, being negotiable, is 
a circulating credit, and it makes no difference to the 
holder that the maker of the note and the payee named in 
it may have had other dealings between themselves, on 
account of which the payee may have become indebted to 
the maker; and in a suit upon a negotiable note, wdiich 
has been indorsed for value to a third person, the maker 
cannot set up against the note anything which the payee 
owes him. The maker of a negotiable note, indorsed by 
the payee for value to another, must pay the whole note. 
But a note which is not negotiable stands upon a different 
footing. It may pass from the payee to whom it was made, 
for it may be assigned by the original holder to another 
But the assignee of a non-negotiable note takes it subject 
to all set offs which the maker may have against the original 
holder. Let us suppose that Jones makes his note to Smith 
tor $500, and the note is not negotiable, and Smith assigns it 
to Green, but at that time Smith has become indebted to 
Jones upon another contract, in the amount of $250; when 
Green sues to collect the note, Jones can set off against 
the $500 note the $250 which Smith owed him. It will make 
no dift'erence that Green paid Smith the full $500 called for 
by the note ; the note was not negotiable, and he was bound 
to take it, if he chose to take it at all, subject to any defense 
which the maker might have acquired against his assignor. 
Civil Code, Section 1459. 

Section 733. — JOINT NOTE. — Two or more persons 
may make a note, and become jointly liable to pay it. That 
is, the intention may be expressed by two or more makers 
of a note that they will take upon themselves the mutual 



NOTES AND MORTGAGES. 383 

and joint obligation of paying the sum of money specified 
in it. 

Civil Code, Section 1430. 

Section 734.— FORM OF JOINT NOTE.— A joint note 
may be made in the following form : — 

, Cal, , 190. . 

after date, for value received, we prom- 
ise to pay to , or order, the sum of 

Dollars, Gold Coin of the United 

States, with interest thereon in like Gold Coin at the rate 
of per cent per annum from date until paid. Inter- 
est payable semi-annually, and if not so paid to be added 
to the principal and bear interest at the same rate until 
paid. 



Section 735.— LIABILITY ON JOINT NOTE.— The 
makers of a joint note are all liable together, each for his 
proportionate share, and must all be sued together. But 
one of the makers of a joint note, who satisfies more than 
his share of the claim against all, may compel all the parties 
joined with him to contribute their proportion of the amount 
so paid by him. 

Civil Code, Section 1432. 

Section 736.— JOINT AND SEVERAL NOTE.— Sev- 
eral persons may make a note so as to become jointly and 
severally liable to pay it ; such a note expressing the inten- 
tion, that the holder may have the right to call upon all or 
any one or more of the makers for payment of the note, at 
his option. 

Civil Code, Section 1430. 

Section 737.— FORM OF JOINT AND SEVEKA.L 
NOTE. — A joint and several note may be made in the fol- 
lowing form : — 



384 BUSINESS LAWS FOR BUSINESS MEN. 

,, Cal., , 190. . 

after date, for value received, we or 

either of us promise to pay , or 

order, at , California, the sum of 

Dollars, Gold Coin of the United States, with 

interest thereon in like Gold Coin at the rate of per 

cent per annum from date until paid. Interest payable 
semi-annually, and if not so paid to be added to the prin- 
cipal and bear interest at the same rate until paid. 



Section 738.— LIABILITY OF MAKERS OF JOINT 
AND SEVERAL NOTE.— The makers of a joint and 
several note are liable in a tv\-ofold capacity. All are liable 
together, each for his proportionate share of the sum spec- 
ified in the note, and each one of the makers is severally 
liable, standing alone. The holder of the note may sue 
all of the makers together, and recover a judgment against 
all, or he may, at his option, sue any one of the makers 
alone, and compel him to pay the w^hole note. If one of 
the makers is compelled to pay the whole note, he, in turn, 
may compel the others to pay him their proportionate share 
for which they became liable on the note. AA'ith this, how- 
ever, the holder has nothing to do. He has the right to 
single out any one or more of the signers of a joint and 
several note, and collect from him or them, or he may col- 
lect from all. 

Section 739.— INTEREST.— The California laAv of inter- 
est does not recognize usury, and any rate may be charged 
which the parties agree upon. In many States of the Union 
the law limits the rate of interest which can be charged to 
a certain per cent per annum, ranging in amount from 
5 to 12 per cent; but in California the conditions of settle- 
ment and early business dealings always Avere such as 
to encourage inflation and speculation, and consequent high 
rates of interest, and the Legislature has several times re- 
fused to enact a law against usury. Therefore the law now 



NOTES AND MORTGAGES. 385 

is that the parties to a promissory note may agree upon any 
.■ate of interest, and the note will be valid. 

Section 740.— LEGAL RATE OF INTEREST.— The 

legal rate of interest in California, that is, the rate allowed 
by law when the note does not say anything about interest, 
is seven per cent per annum. Therefore, if a note is made 
which does not say anything at all about interest, and suit 
is brought to collect it, the judgment against the maker 
will bear interest at the rate of seven per cent per annum. 
This interest will commence at the time the judgment is 
made in favor of the holder of the note. 

Section 741.— ATTORNEY FEES.— A note may be 
made providing that, in the event of the holder commencing 
suit to collect it, the maker will pay an attorney fee to the 
payee. But, while such note is legal and valid, it is not 
negotiable, and can only be transferred by assignment. It 
is never desirable to make a note of this kind, as the dis- 
advantages more than offset any profit which might pos- 
sibly accrue from the provision calling for attorney fees. 

Section 742.— WHEN NOTE IS OUTLAWED.— In 

California a note is outlawed if it is allowed to run more 
than four years after it becomes due. For instance, if a 
note is made payable one year after date, it will not out- 
law for five years ; the holder may commence a suit on the 
note after the expiration of the one year; but he may wait, 
and commence the suit at any time within four years after 
the note by its terms becomes due. The same rule of 
course applies to a note made payable at any other term. 
The note remains good for four years after it is due. After 
four years from the date when the note becomes due, in a 
suit upon the note, the maker or other person liable to pay 
it can set up as a defense that it is outlawed. And if in 
fact the holder has waited more than four years after the 
note has become due, before commencinof a suit upon it, 

25 



386 BUSINESS LAWS FOR BUSINESS ME^N. 

the note will be outlawed, and cannot be collected if such 
defense is made. 

Code of Civil Procedure, Section 337. 

Section 743.— WHEN OUTLAWED NOTE IS RE- 
NEWED. — A note is renewed by the promise of the maker 
to pay the sum due. But the promise must be in writing, 
in all cases, or the note will not be renewed. There must 
be a written acknowledgment of the debt and an uncon- 
ditional promise to pay it, in order to revive it, after a note 
is outlawed. The acknowledgment and promise are not 
required to be in any particular form. It may be indorsed 
on the note ; it may be by letters written by the maker to 
the creditor; or it may be by writing, in the form of a 
contract, to revive and keep alive the note. But in what- 
ever form the writing is, whether by indorsement, or letter, 
or formal contract, the written promise must be signed by 
the debtor and made to the creditor. If the maker of the 
note admits, after it is outlawed, to a third person that 
he owes the money, the note will still remain outlawed. 
The law is that the acknowledgment of an outlawed debt 
and the new promise to pay it, must be made to the creditor 
himself, and must be in writing, signed by the debtor. The 
payment of interest will not revive an outlawed note, un- 
less such payment is accompanied by a written acknowl- 
edgment of the principal debt and a promise to pay it. A 
part payment of the amount of a note, after it has becom.e 
outlawed, will not revive the whole debt without a writ- 
ten acknowledgment. A letter from the maker of the note 
to the creditor, after it is outlawed, expressing a desire to 
pay it, will revive the debt and create a new promise to 
pay. The holder of the note may then sue to collect the 
amount due, at any time within four years after the new 
promise was made. The effect of the new promise to pay 
is to extend the obligation of the debtor four years longer. 
If one only of several joint makers of a note, after it is out- 
law^ed, signs a written acknowledgment and promise to pay 



NOTKS AND MORTGAGES. 387 

the debt, he binds himself alone. He cannot bind anybody 
but himself., and if the creditor wants the obligation ex- 
tended as to all the joint makers of the note, he must get 
the signatures of all. 

Code of Civil Procedure, Section 360. 

Section 744.— INDORSEMENT OF NEGOTIABLE 
NOTE. — A negotiable note, if payable "to order," passes 
from one person to another by indorsement. This indorse- 
ment must be in writing. One who agrees to indorse a 
negotiable note is bound to write his signature upon the 
back of the note, if there is sufficient space on the back for 
that purpose. But it sometimes happens that the holder 
of a note has written on the back acknowledgments of 
money paid, or that many previous indorsers have signed 
their names, and in this manner the entire back of the note 
is covered, and there is no more room for any further writ- 
ing upon it. The law of California provides, that when this 
happens, the holder may pin or paste on a piece of paper 
sufficient for his own and subsequent indorsements. Such 
addition to the original note thus becomes incorporated as 
a part of it. A note with the name of the holder written 
by him on the back, or, if there is no room on the back, 
on a piece of paper pinned or pasted to the note, passes the 
legal title in the debt to the person to whom the note is 
delivered. 

Civil Code, vSections 3108, 3109, 31 10. 

Section 745.— KINDS OF INDORSEMENTS.— There 

are two kinds of indorsements ; one is called a general in- 
dorsement, and the other is called a special indorsement. 

Section 746.— GENERAL INDORSEMENT.— A gen- 
eral indorsement is one where the name of the indorser 
is written on the back of the note, without writing the name 
of any indorsee. The note may then be delivered to any- 
body. The indorsement is general, because not made to 



388 BUSINESS LAWS FOR BUSINESS MEN. 

any one in particular. Therefore the title to the note passes 
to any person to whom it is delivered, is payable to the 
bearer, and may be indorsed and transferred by the bearer. 

Section 747.— SPECIAL INDORSEMENT.— A special 

indorsement is where the holder w^rites his name on the 
back of the note, and also writes the name of the indorsee, 
thus specifying a particular person to whom payment is to 
be made. A note thus indorsed cannot be indorsed again 
and passed on by anybody but the indorsee whose name is 
written on the back of the note. 

Civil Code, Sections 31 12, 31 13. 

Section 748.— ASSIGNMENT OF NOTE NOT NEGO- 
TIABLE. — The difference between a note which is nego- 
tiable; and a note which is not negotiable, has been ex- 
plained. A note which is not negotiable, for any reason 
may nevertheless be transferred, by assignment. There is 
no particular form of assignment. The following words 
written on the back of a non-negotiable note are sufhcient 
to assign the note from the holder to another person : — 

"I hereby assign the within note to John Smith. 

"James Green." 

It has also been held by the courts that a non-negotiable 
note may be legally assigned by the mere indorsement of 
the name of the holder and a delivery of the note to another 
person. 

Section 749.— LIABILITY OF INDORSEES.— Every 

indorser of a negotiable note, unless his indorsement is 
qualified in some way, by his indorsement warrants to 
every subsequent holder thereof that the note is in all re- 
spects what it purports to be ; that he has a good title to 
it ; that the signatures of all prior parties are genuine ; and 
that if the note is dishonored the indorser, upon notice of 
the dishonor being given him, will pay the amount due 
on the note, with interest, to the indorsee or other holder. 



NOTES AND MORTGAGES. 389 

Any number of indorsements may be made of a promissory 
note, and the last indorsee may look to all of the indorsers 
for his money, and he will have the same rights against 
every one of the indorsers as he has against the particular 
holder who indorsed the note to him. Sometimes a note, 
which has been indorsed by a prior indorser, comes back 
again to him by re-indorsement in the course of business, 
when he will thereby become reinstated in his original 
rights in the note ; but he will have no claim upon any of 
the indorsers whose names appear on the note subsequent 
to his own. The indorsement of a note amounts to a con- 
tract on the part of the indorser, unless he qualifies his 
indorsement, that he will pay the indorsee, or other holder, 
the amount due, upon receiving notice of the dishonor of 
the note. 

Civil Code, Sections 31 16, 3120. 

Section 750.— INDORSEMENT "WITHOUT RE- 
COURSE." — An indorsement may be so qualified that the 
liability of the indorser will be greatly limited. Thus, if 
the indorser writes his name on the back of the note, and 
adds the words, ''without recourse," he thus notifies the 
person to whom he transfers the note that he will not be 
responsible as an indorser, and cannot be held liable in 
case the maker does not pay. But there are circumstances 
under which the indorser ''without recourse" will neverthe- 
less be liable. By the act of transferring and delivering the 
note to another, although indorsed "without recourse," the 
indorser impliedly warrants that the note is valid, that the 
signatures of prior parties whose names appear thereon are 
genuine, that the. note has not been paid, and that he himself 
hag practiced no fraud in the transfer. 

Section 751.— RIGHTS OF INDORSEE IN DUE 
COURSE OF BUSINESS.— An indorsee in due course of 
business, who acquires for value a promissory note duly 



390 BUSINESS LAWS FOR BUSINESS MEN. 

indorsed, before its apparent maturity, and without knowl- 
edge of its actual dishonor, gets an absolute title to the 
note. It is thereafter valid in his hands, notwithstanding 
any defect in the title of the person from whom he acquired 
it. It has been said that the law of California cuts off all 
defenses on the part of the maker of a note, as against a 
holder in due course of business. 

Civil Code, Sections 3123, 3124. 

Section 752.— WHEN NOTE MUST BE PRESENTED 
FOR PAYMENT. — ^lany vexatious questions constantly 
arise about the presentation of a note for payment, and 
these usually refer to the indorsers. The maker is bound 
whether the note is presented to him or not, for he agrees 
to pay it at all events. But the indorser occupies a dift'er- 
ent position. He agrees to pay if the note is dishonored. 
The indorser is only a surety. So, before the indorser can 
be called upon for the money, the holder, whoever he is, 
must tr\' to collect the money from the maker of the note 
The Legislature of California has prescribed by law when 
a note must be presented for payment. The law provides, 
that a note payable on demand may be presented to the 
maker for payment upon any day ; but a note made payable 
at a certain specified time must be presented for payment 
upon the day it is due. It must be presented within rea- 
sonable hours ; and if it be payable at a bank, w^ithin the 
usual banking hours of the vicinity, unless the person to 
whom it should be presented consents to its being pre- 
sented at any hour of the day. What are reasonable hours, 
within which the note must be presented, will depend upon 
circumstances. If the maker has a place of business, it 
must be presented within the usual business hours of the 
place or town ; if presented at the maker's residence, it may 
be presented during the wdiole day until the hours of rest 
in the eA'ening. 

Civil Code, Section 3131. 



NOTES AND MORTGAGES. 391 

Section 753.— BY WHOM NOTE MUST BE PRE- 
SENTED FOR PAYMENT.— The holder of the note must 
present it to the maker. By this is not meant that the 
holder should go in person and present the note. He may 
go in person, or he may send his agent or attorney. If 
the holder be dead, at the time the note is due, then the 
executor or administrator of his estate can present the note 
and demand payment. 

Section 754.— TO WHOM NOTE MUST BE PRE- 
SENTED FOR PAYMENT.— The note must be presented 
to the maker, if he can be found at the place where pre- 
sentment should be made. If the maker cannot be found 
there, then it is lawful to present the note to his agent in 
charge of his place of business or other place specified in 
the note as the place of payment. It may be presented 
to a clerk of the maker at his place of business ; or to one 
partner of a firm, if a firm note ; or to the administrator or 
executor of a deceased maker; or to an employee of the 
maker at the place where the note is to be presented, if 
one can be found there, and the maker cannot be found. 

Section 755.— AT WHAT PLACE NOTE MUST BE 
PRESENTED FOR PAYMENT.— A note which specifies 
a place for payment must be presented there. It is a com- 
mon 'thing for notes to be made payable at a certain bank, 
and in such case it will not do to present the note anywhere 
else, and so as to any particular place of payment specified 
in a note. If a note does not name any particular place for 
its payment, then it must be presented at the place of resi- 
dence or the place of business of the maker, or wherever 
he may be found. It is at the option of the holder, where 
no place is specified in the note, whether he will present 
it to the maker at his residence, or his place of business, 
or in the street, or at any other place which may appear 
convenient. 



392 BUSINESS LAWS FOR BUSINESS MEN- 

Section 756.— WHAT WILL EXCUSE PRESENT- 
MENT FOR PAYMENT.— There are some circumstances 
which under the law of CaHfornia will excuse presentment 
for payment. If the maker of the note has no place of 
business, or if his place of business or residence cannot, 
with reasonable diligence, be ascertained, then presentment 
for payment is excused and the indorser is bound. If the 
maker moves away, after executing the note, and the holder 
makes diligent inquiry, and cannot learn his residence or 
place of business when the note becomes due, the failure 
to present the note to the maker for payment, under such 
circumstances, will not relieve the indorser from liabilit}-. 
This is upon the principle that the holder has done all 
he can do, has shown good faith and diligence, and there 
is no reason why the indorser should be allowed to take 
advantage of a circumstance over which the holder of the 
note had no control. 

Section 757.— WHAT IS REASONABLE DILIGENCE 

— Reasonable diligence is a question of circumstances. In- 
evitable accident or overwhelming calamity may prevent 
the holder of a note from presenting it for payment to the 
maker on the day it is due, yet if he does present it at the 
very earliest practicable time thereafter, it will be sufficient 
For it may happen that the holder had the intention in good 
faith to present the note at the proper time, yet all inter- 
course is stopped between the places where the holder and 
the maker live, by freshets, or by violent storms, or earth- 
quakes, or other unforeseen conditions of natural objects 
rendering travel or communication impossible ; or the pres- 
ence of some dread and contagious disease in one or the 
other neighborhood, such as the yellow fever, or cholera, 
or smallpox, renders commercial intercourse impossible ; 
or a political revolution may exist in the place where the 
holder or the maker lives, and by a blockade, or a battle 
prevent the holder from presenting the note on the day 



NOTKS AND MORTGAGES. 303 

when it is due; or war may be going on between the conn- 
try where the maker Hves and the coimtry where the holder 
resides. In all the cases above supposed, if the note is 
presented within a reasonable time after the prohibitive 
obstacle is removed, it w^ill be held sufficient under the law. 

Section 758.— WHEN A NOTE IS DISHONORED.— 

A note is dishonored when it is not paid, on presentment 
to the maker for that purpose ; and it is also dishonored 
when it is not paid without presentment, when presentment 
is excused. 

Civil Code, Section 3141. 

Section 759.— NOTICE OF DISHONOR.— If the holder 
wishes to make the indorser pay the note, after vainly at- 
tempting to collect it from the maker, he must give the 
indorser notice of the dishonor of the note. He may give 
the notice in person, or through his agent. A Notary, at- 
torney, or bank, or other agent for collection, may give the 
notice as the agent of the holder. If there are several in- 
dorsers on a note, and notice of dishonor is given by the 
holder to the last indorser, he in turn must give notice of 
the dishonor to the indorser immediately before him, other- 
wise he cannot reimburse himself for the amount he is 
compelled to pay the holder. 

Civil Code, Section 3142. 

Section 760.— HOW NOTICE OF DISHONOR MAY 
BE GIVEN. — A notice of dishonor may be given by deliv- 
ering it to the indorser, personally, at any place; or, by 
delivering it to some person of discretion, at the place of 
residence or business of the indorser, apparently acting 
for him ; or, by getting the best information obtainable of 
the place of residence of the indorser, and depositing the 
notice in the mail directed to the indorser at that place, 
postage paid. In case of the death of the indorser, the 
notice must be given to his executor or administrator, or 



394 BUSINESS LAWS P'OR BUSINE:SS ME:n. 

if there is no executor or administrator, then to any mem- 
ber of his family who resided with him at his death, or 
if he had no family, then it must be mailed to his last 
place of residence. A notice of dishonor sent to an in- 
dorser after his death is nevertheless valid, if the person 
sending it was ignorant of his'- death, and could not by 
ordinary diligence have ascertained the fact. 
Civil Code, Sections 3144, 3145, 3146. 

Section 761.— WHEN NOTICE OF DISHONOR MUST 
BE GIVEN. — If the notice of dishonor of a note is not 
given by mail, then it must be given either on the same 
day the maker fails to pay it, or on the next business day 
thereafter. When notice of dishonor is given by mail, it 
must be deposited in the post-office in time for the first 
mail which closes after noon of the first business day suc- 
ceeding the dishonor, and which leaves the place where the 
note was dishonored for the place to which the notice should 
be sent. The holder has at least the whole forenoon of the 
first business day after the dishonor to send off the notice. 
One of several indorsers, who receives notice of dishonor 
from the holder of the note, has the same time to give 
notice to another indorser; that is, he must give notice to 
a prior indorser either on the same day he receives his 
notice from the holder, or on the next business day, unless 
he gives notice by mail, which must be in the same man- 
ner as the holder is required to give notice by mail. 
Civil Code, Sections 3147, 3148, 3150. 

Section 762.— FORM OF NOTICE OF DISHONOR.— 

No particular form of notice is necessary. It may be given 
in any form which describes the note with reasonable 
certainty, and substantially informs the party receiving it 
that the note has been dishonored. The following is a 
form of notice in writing, to be served on the indorser : — 



XOTICS AND AiOKTGAGKS. 395 

, Cal., , 190. . 

JOHN GREEN:— 

Dear Sir: You are hereby notified that the certain 
note made and dehvered by John Smith to Samuel Stokes, 
dated April ist, 1901, for $500, and interest at 8 per cent per 
annum, and indorsed April ist, 1902, by you, is now held 
by me ; that on the day when said note was due I pre- 
sented it for payment to the said John Smith and demanded 
payment, but he failed and refused to pay the same ; and I 
hereby notify you that I will hold you for the amount due 
on said note. JAMES BROWN. 

Section 763.— WHEN NOTICE OF DISHONOR IS 
EXCUSED. — Notice of the dishonor of a note is excused, 
when the holder cannot, with reasonable diligence, ascer- 
tain either the place of residence or business of the indorser 
to be charged ; or, when there is no mail communication 
between the town of the holder and the town in which the 
place of residence or business of the party to be charged 
is situated ; or, when the notice is waived by the party him- 
self upon whom it was to be served. If, before or after a 
note becomes due, an indorser has received full security, 
or the maker has assigned all his estate to him as such 
security, presentment and notice to him are excused. De- 
lay in giving notice of dishonor is also excused, when 
caused by circumstances which the holder could not have 
avoided by the exercise of reasonable care and diligence — 
as, by^n epidemic, or riot, or war, or flood, or storm. 
Civil Code, Sections 3156, 3157, 3158. 

Section 764.— PROTEST OF FOREIGN NOTE.— What 
has been said of notice of dishonor applies only to a note 
made and payable in California. A note made in a foreign 
country, or in another State, and sent to this State for col- 
lection and dishonored, must be protested by a Notary 
Public. 

Section 765.— WHEN SUIT TO COLLECT NOTE 
CAN BE BROUGHT.— In California a suit to collect a 



396 BUSINESS LAWS FOR BUSINESS MEN. 

note can be brought at any time within four years after 
it is due, provided the note was made in this State. If 
the note was made out of the State, a suit can be brought 
in this State to collect it at any time within two years after 
it is due. 

Code of Civil Procedure, Sections 337, 338. 

Section 766.— IN WHAT COURT SUIT TO COLLECT 
NOTE MUST BE BROUGHT.— In all cases where the 
sum sued for amounts to $300, exclusive of interest, the 
suit must be brought in the Superior Court. In cases 
where the sum sued for, exclusive of interest, amounts to 
less than $300, the suit must be brought in the Justice 
Court. 

Code of Civil Procedure, Sections "jG, 112. 

Mortgages 

Section 767.— MORTGAGE SECURITY.— The ordinary 
security for the payment of a promissory note is a mort- 
gage of either personal or real property. By a mortgage 
the debtor secures his creditor without the necessity of 
changing the possession of the property. 

Section 768.— WHAT INTEREST IN REAL PROP- 
ERTY MAY BE MORTGAGED.— Any interest in real 
property which is capable of being transferred may be 
mortgaged. Interest in real property covering the absolute 
title in fee simple may, of course, be mortgaged. But the 
right to mortgage does not stop here. The interest of an 
heir or devisee under a Avill, being a vested right, may be 
mortgaged. One in possession of the land under a verbal 
agreement to purchase may mortgage the interest that he 
has. Any interest in the reversion of lands, or any interest 
in lands which will surely come to a person upon the hap- 
pening of some event, may be mortgaged. 
Civil Code, Section 2947. 



NOTES AND MORTGAGES. 397 

Section 769.— WHAT PERSONAL PROPERTY MAY 
BE MORTGAGED.— The Legislature of California has 
provided by law what personal property may be mortgaged. 
Mortgages may be made upon the following personal prop- 
erty, and none other: (i) Locomotives, engines, and other 
rolling-stock of a railroad. (2) Steamboat machinery, the 
machinery used by machinists, foundrymen, and mechan- 
ics. (3) Steam engines and boilers. (4) Mining machin- 
^i"y- (5) Printing presses and material. (6) Professional 
libraries. (7) Instruments of surveyors, physicians, and 
dentists. (8) Upholstery, furniture, and household goods. 
(9) Oil paintings, pictures, and works of art. (10) All 
growing crops, including grapes and fruit. (11) Vessels of 
more than five tons burden. (12) Instruments, negatives, 
furniture, and fixtures of a photograph gallery. (13) The 
machinery, casks, pipes, tubes, and utensils used in the man- 
ufacture or storage of wine, fruit brandy, fruit syrups or 
sugar, also wines, fruit brandy, fruit syrup or sugar, with 
the cooperage in which the same are contained. (14) 
Pianos and organs. (15) Iron and steel safes. (16) Neat 
cattle, horses, mules, swine, sheep, and goats, and the in- 
crease thereof. (17) Harvesters, threshing outfits, hay 
presses, wagons, farming implements, and the equipments 
of a livery stable, including buggies, carriages, harness, 
robes. (18) Abstract systems, books, maps, papers, and 
slips of^searchers of records. (19) Raisins and dried fruits. 
cured or in process of being cured. Also, all boxes, fruit 
graders, drying-trays, and fruit ladders. 
Civil Code, Section 2955. 

Section 770.— HOW MORTGAGE IS EXECUTED 
AND ACKNOWLEDGED.— A mortgage must be in writ- 
ing, and signed by the mortgagor. It should be recorded, 
and therefore must be acknowledged before an officer au- 
thorized to administer oaths. It is usual in California to 
have a mortgage acknowledged before a Notary Public, 
1)ut an acknowledgment before a Justice of the Peace, or 



398 BUSINKSS LAWS I^OR BUSINESS MEN. 

County Clerk, or County Recorder, is equally good. If 
the person executing the mortgage cannot write, he may 
sign the mortgage by an X or mark, with two witnesses to 
his signature. 

Section 771.— MORTGAGE OF MARRIED WOMAN. 

— A married woman may mortgage her own property, with- 
out the consent of her husband, and without his joining 
her in the mortgage in any way. A married woman's ac- 
knowledgment to a mortgage is made in the same manner 
as that of any other person. 

Section 772.— MORTGAGE OF MINOR.— A minor in 
California cannot under the age of 18 make a contract 
relating to real property. Over the age of 18 he may exe- 
cute a mortgage of his real property, but it is voidable at 
his election when he comes of age. He may mortgage his 
personal property, whether under or over 18 years of age, 
provided the property is in his own possession or control; 
but this mortgage is also subject to be disaffirmed by him 
when he comes of age. 

Section 773.— MORTGAGE OF PARTNERSHIP 
PROPERTY. — Partners may make a mortgage of partner- 
ship property, but they must sign their own names. Thus, 
if Samuel Jones and James Smith are partners, doing busi- 
ness under the firm name of Jones & Smith, their mortgage 
of partnership property should not be signed with the firm 
name, ''J<^nes & Smith," but should be signed with their 
individual names, "Samuel Jones. James Smith." 

Section 774.— RECORDING MORTGAGES.— The law 

of California provides for the acknowledgment and record- 
ing of mortgages, real or personal. The mortgage is re- 
corded in the office of the County Recorder of the county 
Avhere the property is situated. 



NOTES AND MORTGAGKS. 399 

Section 774a.— PROOF OF EXECUTION OF MORT- 
GAGE. — It sometimes happens that a mortgage is made,, 
but not acknowledged by the mortgagor; and the holder 
of the mortgage afterwards desires to record it. Not hav- 
ing been acknowledged when made, it is not entitled to 
be recorded. But the law provides that proof of the exe- 
cution of the mortgage, when not acknowledged, may after- 
wards be made by either the mortgagor or the mortga,2:ee. 
Proof is made by going before a Notary Public, or other 
officer authorized to take acknowledgments, who upon the 
evidence presented to him certifies to the fact of the execu- 
tion of the mortgage. It is then entitled to be recorded, 
as though it had been acknowledged in the first instance. 
Civil Code, Sections 1180, 1181, 1182, 1183, 1184 

Section 775.— EFFECT OF RECORDING MORT- 
GAGES OF REAL PROPERTY.— The effect of recording 
a mortgage of real property is to give notice to the world 
of the encumbrance upon it, and to give the mortgage prec- 
edence over every other lien which subsequently attaches 
to the property. A recorded mortgage has precedence over 
one of earlier date which was not recorded, and of which 
the holder of the recorded mortgage had no notice. A re- 
corded mortgage is good against an attachment or home- 
stead subsequently put on the property, or any other lien 
subsequent to the mortgage. 

Section 776.— EFFECT OF RECORDING A CHAT- 
TEL MORTGAGE.— A mortgage of personal property 
must be recorded in the office of the County Recorder of 
the county in which the mortgagor resides. But if the 
mortgagor resides in one county, and the property is situ- 
ated in another county, then the mortgage must be recorded 
in both counties. If the property is removed to another 
county by the mortgagor, the mortgagee must, within thirty 
days, cause the mortgage to be recorded in the county to 
which the property has been removed. If these provisions 



4.00 busine:ss laws for busine:ss me:n. 

are complied with, a chattel mortgage, properly executed, 
gives the same prior lien to the mortgagee of personal 
property which he w^ould acquire under a recorded real 
estate mortgage. A certified copy of a mortgage of 
personal property once recorded may be recorded in any 
other county. 

Civil Code, Sections 2959, 2964, 2965. 

Section 777.— MORTGAGE NOT RECORDED GOOD 
BETWEEN PARTIES.— Even though a mortgage is not 
recorded, it is good between the parties to it, if the mort- 
gage was executed and signed in the manner provided by 
law. 

Section 778.— MORTGAGE ON HOMESTEAD.— A 

mortgage on a horaestead is void unless it is signed and 
acknowledged by both husband and wife. A mortgage 
may be given by the husband alone, on community property, 
if there is no homestead, and it will be good. But the law 
of California provides that a mortgage made after a home- 
stead has been filed, signed by the husband alone, is abso- 
lutely void. The homestead may be mortgaged, but it 
must be by the joint act of the husband and wife. They 
must both sign the mortgage at the time it is made, and 
they must both know that it covers the homestead property. 
So, if the husband signs a mortgage on the homestead, and 
his wife is induced to sign it also, but under the belief that 
the mortgage covers other property alone, it will not be 
good against the homestead. A mortgage of the home- 
stead, to be valid, must be the united act of the husband 
and wife. 

Civil Code, Section 1242. 

Section 779.— DECLARATION OF HOMESTEAD.— 

Sometimes a question will arise as to whether there is a 
legal homestead on file, sufficient to protect the property 
against creditors. This question will be easily answered, 



NOTES AND MORTGAGKS. 401 

by getting from the County Recorder a copy of the decla- 
ration of homestead. The law provides what must be stated 
in the declaration of homestead filed with the County Re- 
corder, and from what j^roperty the homestead may be 
taken. If the claimant be married, the homestead may be 
selected from the community property, or the separate 
property of the husband, or, with the consent of the wife, 
from her separate property. When the claimant is not 
married, but is the head of a family, the homestead can be 
selected from any of his or her property. In order to select 
a homestead, the claimant must sign and acknowledge a 
declaration and file it for record in the office of the County 
Recorder. The declaration of homestead must contain : 
(i) A statement, showing that the person making it is the 
head of a family; or when the declaration is made by the 
wife, showing that her husband has not made such declara- 
tion, and that she therefore makes the declaration for their 
joint benefit ; (2) a statement that the person making it 
is residing on the premises, and claims them as a home- 
stead ; (3) a description of the premises ; (4) an estimate 
of their actual cash value. 

Civil Code, Sections 1237, 1238, 1261, 1263. 

Section 780.— FORM OF DECLARATION OF HOME- 
STEAD BY HUSBAND AND WIFE.— The following is a 
good form of Declaration of Homestead by husband and 
wife, which must be recorded in the office of the County 
Recorder of the county where the land is situated : — 

DECLARATION OF HOMESTEAD :— Know all men 
by these presents, that we do hereby certify and declare 
that we are husband and wife, and that we do now at the 
time of making this declaration actually reside together on 
the land and premises herein described ; that the land and 
premises on which we reside are situate, bounded, and de- 
scribed as follows, to-wit : — 

(Here insert description of land.) 
26 



402 BUSINISSS LAWS I'OR BUSINESS MEN. 

That it is our intention to use and claim the said lot of 
land and premises above described, together with the dwell- 
ing house thereon, and its appurtenances, as a homestead, 
and we do hereby select and claim the same as a home- 
stead; that we make this declaration for our joint benefit, 
and we declare that we have not heretofore made a declara- 
tion of homestead; that the actual cash value of said prop- 
*irty we estimate to be $ 

In witness whereof, we have hereto set our hands and 

seals this day of , 190. . 

(Seal.) 

. . ._ (Seal.) 

State of California, J 

County of . ( 

On this day of , 190. ., before me, a Notary 

Public in and for said County and State, personally appeared 

and , 

personally known to me to be the persons described in and 
who executed the foregoing Declaration of Homestead, and 
they acknowledged to me that they executed the same. 

In witness whereof I have hereunto set my hand and 

affixed by official seal, at my office, on this day of 

, 190- • 



Notary Public in and for the County of 
State of California. 



Section 781.— FORM OF DECLARATION OF HOME- 
STEAD BY HUSBAND.— The following is a good form 
of Declaration of Homestead by the husband alone, and 
must be recorded in the office of the County Recorder of 
the county in which the land is situated : — 

DECLARATION OF HOMESTEAD :— 

Know all men by these presents, that I do hereby cer- 
tify and declare, that I am the head of a family; that I do 
now at the time of making this declaration actually reside 
with my family on the land and premises hereinafter de- 
scribed; that the land and premises on which I reside are 
situate, bounded, and described as follows, to-wit: — 

(Here insert description of land.) 



NOTES AND MORTGAGES. 403 

That it is my intention to use and claim the said lot of 
land and premises above described, together with the dwell- 
ing house thereon, and its appurtenances, as a homestead, 
and I do hereby select and claim the same as a homestead ; 
that I make this declaration for the joint benefit of myself 
and wife, and I declare that my wife has not made a dec- 
laration of homestead ; that the actual cash value of said 
property I estimate to be $ 

In witness whereof, I have hereto set my hand and seal 

this day of , 190. . 

(Seal.) 

State of California, ) 

County of \ 

On this day of , 190. ., before me, a Notary 

Public in and for the said County and State, personally ap- 
peared , personally known to me to 

be the person described in and who executed the foregoing 
Declaration of Homestead, and he acknowledged to me that 
he executed the same. 

In witness whereof I have hereunto set my hand and 

affixed my official seal, at my office, on this day of 

, 190- • 



Notary Public in and for the County of , 

State of California. 

Section 782.— FORM OF DECLARATION OF HOME- 
STEAD BY WIFE.— The following is a good form of 
Declaration of Homestead by the wife alone, and must be 
recorded in the office of the County Recorder of the county 
in which the land is situated : — 

DECLARATION OF HOMESTEAD:— 
Know all men by these presents, that I do hereby cer- 
tify and declare, that I do now at the time of making this 
declaration actually reside with my family on the land and 
premises hereinafter described; that the land and premises 
on which I reside are situate, bounded, and described as 
follows, to-wit: — 

(Here insert description of land.) 

Th^t it is my intention to use and claim the said lot of 



404 busine:ss laws ipor busine:ss m^n. 

land and premises above described, together with the dwell- 
ing house thereon, and its appurtenances, as a homestead, 
and I do hereby select and claim the same as a homestead ; 
that I make this declaration for the joint benefit of myself 
and husband, and I declare that my husband has not made 
a declaration of homestead; that the actual cash value of 
said property I estimate to be $ 

In w^itness whereof I have hereto set my hand and seal 

this day of , 190. . 

.r (Seal.) 

State of California, } 

County of \ 

On this day of , 190. ., before me, a Notary 

Public in and for the said County and State, personally 

appeared , personally known to me 

to be the person described in and who executed the fore- 
going Declaration of Homestead, and she acknowledged to 
me that she executed the same. 

In witness whereof I have hereunto set my hand and 

affixed my official seal, at my office, on this day of 

, 190. . 

Notary Public in and for the County of , 

State of California. 



Section 783.— VALUE OF HOMESTEAD.— The home^ 
stead of husband and wife must not exceed in value the 
sum of $5,000. The value of the homestead selected by 
the head of a family other than the husband or wife must 
not exceed in value the sum of ^1,000. Besides the hus- 
band or wife, any other person may take a State homestead, 
as the head of a family, who has residing on the premises 
and is caring for and maintaining, his or her minor child, 
or minor grandchild, or the minor child of his or her de- 
ceased wife or husband, a, minor brother or sister or the 
minor child of a deceased brother or sister, a father, mother, 
grandmother, or grandfather of a deceased husband or wife, 
or an unmarried sister. 

Civil Code, Section 1261. 



NOTES AND AIORTGAGES. 405 

Section 784.— FORM OF REAL ESTATE MORT- 
GAGE. — A g-Qod form of mortgage on real estate is as 
follows, the blank spaces to be filled in with the proper 
names, dates, amounts, and descriptions : — 

This mortgage made the day of , in the 

year 190. ., by 

Mortgagor to Mortgagee 

Witnesseth 

That the iMortgagor mortgages to the Mortgagee 

those certain lots, or tracts of land situated in 

County, State of California, particularly de- 
scribed as follows, to-wit: — 

(Here insert description of property.) 



as security for the payment of a certain obligation in writ- 
ing, of which the following is a copy : — 

, Cal., , 190. . 

after date 

for value received, . . . .promise to pay 

, or order, at 

Dollars, with inter- 
est from at the 

rate of per cent per annum, payable semi- 
annually, principal and interest payable in United States 
Gold Coin. Interest if not paid when due, to be added to 
the principal and bear interest at the same rate until paid. 



$ 

But in case default' be made in the payment of either the 
principal or any installment of interest provided for in said 
obligation when due, then the whole shall be due at the 
option of the holder of the said obligation, and action may 
be immediately commenced, without notice, to foreclose 
this mortgage. 

And the plaintift, in action to foreclose this mortgage 



406 BUSINESS LAWS FOR BUSINESS MEN. 

shall, upon filing the complaint in foreclosure, be entitled 

to per cent on the amount due on said obligation 

as counsel fees. 

And the holder of said obligation may pay all taxes or 
other encumbrances now subsisting or hereafter to be laid 
upon said land, and may at his option keep fully insured 
against all risks by fire the buildings which are now and 
may be hereafter erected thereon, and such payment shall 
be allowed with interest thereon at the rate of one per cent 
per month. 

And the cost of foreclosure and sale, counsel fees, and 
all payments herein provided for, are and shall be a charge 
upon the property described herein, and repayable on de- 
mand, and payable out of the proceeds of the sale thereof. 

IN WITNESS WHEREOF, the said Mortgagor, 

, has hereunto set hand . . . and seal . . . , 

the day and year first above written. 

(Seal.) 

(Seal.) 

(Seal.) 

State of California, ) gg 

County of ) 

On this day of , A. D. one thousand nine 

hundred and , before me , 

a Notary Public in and for said County and State, residing 
therein, duly commissioned and sworn, personally appeared 



known to me to be the person whose name is subscribed 
to and who executed the within instrument, and he ac- 
knowledged to me that he executed the same. 

In witness whereof, I have hereunto set my hand and 

affixed my of^cial seal at my office in the 

County of , the day and year in this certificate 

first above written. 



Notary Public in and for the County of , 

State of California. 

Section 785.— RULES WHICH APPLY TO CHATTEL 
MORTGAGES. — The law provides how a mortgage of 
personal property must be made, and because this kind of 



NOTES AND MORTGAGES. 407 

mortgage is on movable property, subject to transportation 
from one place to another, the law makes certain strict 
rules which must be applied to the making of every chattel 
mortgage in this State. A mortgage of personal property 
is void as against creditors of the mortgagor, unless it is 
accompanied by the affidavit of all the parties thereto that 
it is made in good faith and without any design to hinder, 
delay, or defraud creditors ; and a mortgage without this 
affidavit is also void as against subsequent purchasers and 
encumbrancers of the property who become such in good 
faith and for value. The law also provides that a mort- 
gage of personal property, to be valid against creditors of 
the mortgagor, or against subsequent purchasers or encum- 
brancers in good faith and for value, must be acknowledged, 
or proved, certified, and recorded in like manner as deeds 
of real property. 

Civil Code, Section 2957. 

Section 786.— FORM OF CHATTEL MORTGAGE.— 

A good form of mortgage on personal property is as fol- 
lows, the blank spaces to be filled in with the proper dates, 
names, amounts, and descriptions : — 

THIS MORTGAGE made the day of , in 

the year 190 .. , by 

by occupation a , Mortgagor, 

to , by occupation a 

^ , Mortgagee, 

WITNESSETH: That the Mortgagor mortgages to the 
Mortgagee all that certain personal property, with the 

increase thereof, situated in County, State 

of California, and more particularly described as follows, 
to-wit : — 

(Here insert description of property.) 



408 BUSINESS LAWS FOR BUSINESS MEN. 

as security for the payment to the said Llortgagee of the 

sum of Dollars, Gold Coin 

of the United States, on the day of , igo. . , 

with interest thereon at the rate of per cent per 

annum, payable semi-annually, according to the terms and 
conditions of a certain promissory note of which the fol- 
lowing is a copy : — 

, Cal., , 190 

after date 

for value received, .... promise to pay 

, or order, at 

Dollars, with interest 

from , at the rate of 

per cent per annum, payable semi-annually, principal and 
interest payable in United States Gold Coin. Intefest, if 
not paid when due, to be added to the principal and bear 
interest at the same rate until paid. 



$ 

This mortgage is also made as security for all other sums 
now due or that may hereafter become due on account or 
otherwise from the mortgagor to the mortgagee. It is also 
agreed that in case the mortgagee should bring suit to fore- 
close this mortgage, upon filing the complaint he shall be 
allowed a reasonable attorney fee, the same to be secured 
by this mortgage. 

It is also agreed that if the mortgagor shall fail to make 
any payment as in said promissory note or in this mortgage 
provided, or if the mortgagor shall sell the said property 
herein mortgaged without the written consent of the mort- 
gagee, or remove the same from the County of , 

or, if the mortgagee shall hereinafter deem himself insecure, 
then in either of the above events the mortgagee may take 
possession of the said personal property, using all neces- 
sary force so to do, and immediately proceed to sell the 
same in the manner provided by law, and without fore- 
closure, and from the proceeds may pay the whole amount 



NOTES AND MOHTGAGKS. 



409 



due the said mortgagee, as specified in said note and mort- 
gage. 

Signed and executed in the presence of 



State of CaHfornia, 
County of 



ss. 



(Seal.) 
(Seal.) 
(Seal.) 



, the mortgagor. . . in the foregoing 

mortgage named, and , 

the mortgagee in said mortgage named, being duly sworn, 
each for himself doth depose and say, that the aforesaid 
mortgage is made in good faith and without any design to 
hinder, delay, or defraud any creditor or creditors. 

(Seal.) 



Subscribed and sworn to before me this 
day of , 190. . 



(Seal.) 
(Seal.) 



Notary Public in and for County, California. 

State of California, ) 

County of ) 

On this day of , 190. . , before me, a 

Notary Public in and for the County of ; residing 

therein, duly commissioned and sworn, personally appeared 

, known to me to 

be the person described in, whose name is subscribed to, 
and who executed the within instrument, and he acknowl- 
edged to me that he executed the same. 

IN WITNESS A\^HEREOF, I have hereunto set my 
hand and affixed my official seal at my office in the said 

County of , the day and year in this certificate 

first above wn'tten. 



Notary Public in and for the County of 
State of California. 



Section 787.— DEED AS SECURITY AND AGREE- 
MENT TO DEED BACK.— When a deed of property is 
given as security for a note, and a written agreement is 



410 BUSINESS LAWS ^OR BUSINESS MEN. 

given to the maker that the property will be deeded back 
to him when the note is paid, the transaction constitutes 
a mortgage, and nothing more. Many lawsuits have oc- 
curred, where the holder of such a deed has claimed to be 
the absolute owner of the property, but the courts have 
invariably held that it is nothing more than a mortgage, 
and that the holder must bring a foreclosure suit upon it, 
just the same as if it were a mortgage in the ordinary terms. 

Section 788.— LAWFUL INTEREST.— There is no law 

against usury in California. A note may specify any rate 
of interest, and it will be allowed, according to the terms 
of the note, until the entry of judgment in a suit to collect 
the note. 

Civil Code, Section 1918. 

Section 789.— LEGAL RATE WHERE NO INTEREST 
SPECIFIED. — If a note does not specify any rate, interest 
is payable on it at the rate of seven per cent per annum 
after the money becomes due. Thus, if a note is made 
payable in sixty days, which does not specify any rate of 
interest, the legal rate of seven per cent is payable on it, 
beginning with the termination of the sixty days. If part 
of the note is paid in sixty days, no interest is payable 
except on so much of it as remains unpaid. In the compu- 
tation of interest for a period less than a year, 360 days 
are deemed to constitute a year. 
Civil Code, Section 1917. 

Section 790.— COMPOUND INTEREST.— The maker 
of a note may lawfully agree, and may insert in the note, 
that if the interest is not punctually paid it shall become 
a part of the principal, and thereafter bear the same rate 
of interest as the principal debt. 
Civil Code, Section 1919. 

Section 791.— INTEREST ON JUDGMENT.— Interest 
is payable on judgments recovered in the courts of this 



NOTES AND MORTGAGES. 411 

State at the rate of seven per cent per annum, but such 
interest cannot be compounded in any manner. 
Civil Code, Section 1920. 

Section 792.— WHO MUST PAY TAXES ON MORT- 
GAGE. — The mortgagee must pay the taxes on the mort- 
gage. The Constitution of the State prohibits the making 
of any contract whereby the mortgagor is required to pay 
the taxes, and also provides that if a lender takes a mort- 
gage which requires the borrower to pay the taxes on the 
mortgage, all the interest provided for shall be forfeited. 

Constitution of California, Article XIII, Section 5. 

Section 793.— INSURANCE ON MORTGAGED 
BUILDINGS. — Either the mortgagor or mortgagee may 
keep the buildings on the land insured. A mortgage gen- 
erally provides that the mortgagee may insure the build- 
ings, and the mortgagor must repay the amount paid as pre- 
miums, with interest. 

Section 794.~ATTORNEY FEES.— There is no lien on 
mortgaged property for attorney fees, unless the mortgage 
expressly so provides. 

Section 795.— MORTGAGE FOR FUTURE AD- 
VANCES. — A mortgage may be made which will cover 
and secure not only a sum of money paid in hand, but also 
future advances of the mortgagee to the mortgagor. Such 
a mortgage is good, and avoids the necessity of a number 
of mortgages where money is advanced at different times 
to the same person. 

Section 796.— FIRST AND SECOND MORTGAGES. 

— A mortgage properly executed and recorded takes prec- 
edence of other mortgages subsequently placed on the same 
property. If the property is sold under foreclosure, the 
first mortgage must be first paid. 



412 BUSINESS LAWS I^OR BUSINE:SS MEN. 

Section 797.— IN WHAT COURT SUIT MUST BE 
BROUGHT TO FORECLOSE MORTGAGE.— A suit to 
foreclose a mortgage on personal property can be brought 
in either the Justice Court or the Superior Court, if neither 
the amount of the lien nor the value of the property is as 
much as $300. .If the mortgage lien is as much as $300, 
or if the value of the property mortgaged is $300 or over, 
the suit to foreclose the mortgage must be brought in the 
Superior Court. All suits to foreclose mortgages on real 
property must be brought in the Superior Court. 

Section 798.— WHEN MORTGAGE IS OUTLAWED. 

— A mortgage is outlawed four years after it becomes due. 
A suit to foreclose a mortgage must be commenced within 
four years after it is due, otherwise the suit cannot be 
maintained. 

Code of Civil Procedure, Section 337. 

Section 799.— WHAT PROPERTY CAN BE SOLD TO 
SATISFY MORTGAGE.— Only so much of the mortgaged 
property can be sold as will bring enough to pay the debt 
and the costs and expenses of foreclosure. Therefore, 
neither real estate nor personal property will be sold in 
one lot, to satisfy a mortgage debt, if it appears that a sale 
of a part only will bring enough to pay the debt and costs 
and expenses. 

Section 3oo.— ORDER IN WHICH PROPERTY 
MUST BE SOLD.— As a general rule, in the sale of 
mortgaged property under foreclosure, where the mortgage 
covers both real and personal property, the court in its 
decree of foreclosure will direct that the personal property 
be sold first. When the sale is of real property, consisting 
of several known lots or parcels, they must be sold sep- 
arately. The judgment debtor, if present at the sale, may 
also direct the order in which property, real or personal, 
shall be sold, when such property consists of several known 



NOTKS AND MORTGAGIvS. ^L'J 

lots or parcels, or of articles which can be sold to advan- 
tage separately, and the Sheriff must follow such directions. 
Code of Civil Procedure, Section 694 

Section 801.— COSTS OF FORECLOSURE.— The costs 
of foreclosure, including" reasonable attorney fees, when 
provided for in the mortgage, are taxed to the mortgagor^ 
and must be paid out of the proceeds of the sales of the 
mortgaged premises. 

Section 802.— WHO MAY BUY AT FORECLOSURE 
SALE. — Any person may buy in the property at a fore- 
closure sale, except the officer making the sale, or his 
deputy. The mortgagee may buy in the property, if he 
will bid higher than otlier bidders, or if no one else appears 
to bid. 

Section 803.— CERTIFICATE OF SALE.— The officer 
making the sale gives to the purchaser a certificate of sale, 
containing a particular description of the real property sold, 
the price bid for each distinct lot or parcel, the whole price 
paid, and when the property is subject to redemption the 
certificate must so state. x\nd when the judgment under 
which the sale has been made is payable in a specified kind 
of money or currency, the certificate must specify the sanie 
as the money or currency in which redemption may be 
made. Besides giving to the purchaser the certificate of 
sale, a duplicate of such certificate must be filed b}^ the 
officer in the office of the Recorder of the county. If the 
property sold is personal property, capable of manual de- 
livery, the officer must actually deliver the property to the 
purchaser upon payment of the purchase price. 

Code of Civil Procedure, Sections 698, 700. 

Section 804.— ASSIGNMENT OF CERTIFICATE OF 
SALE. — The certificate of sale received by the purchaser 
can be sold and assigned by him, and such assignment 



414 BUSINESS LAWS FOR BUSINESS MEN. 

passes his right and title. The assignment should be re- 
corded, and a notice of the assignment should be served on 
the officer who made the sale. 

Section 805.— WHAT PROPERTY CAN BE RE- 
DEEMED. — There is no redemption from sales of personal 
property. The purchaser acquires an absolute title to per- 
sonal property. When a leasehold interest in real prop- 
erty is sold, and the lease has less than two years to run, 
there is no redemption from the sale. In all other cases 
the property is subject to redemption. 

Code of Civil Procedure, Section 700. 

Section 806.— TIME FOR REDEMPTION.— The prop- 
erty sold may be redeemed from the purchaser at any time 
within twelve months after the sale. The judgment debtor 
has the whole of the last day in which to redeem. 
Code of Civil Procedure, Section 702. 

Section 8o7.-~WHO MAY REDEEM.— The persons 
who may redeem in this State are, the judgment debtor, or 
his successor in interest, in the whole or any part of the 
property; and a creditor having a lien by judgment or 
mortgage on the property sold, or on some share or part 
thereof, subsequent to the lien on which the property was 
sold. 

Code of Civil Procedure, Section 701. 

Section 808.— HOW TO REDEEM.— The law provides, 
that the judgment debtor, or other redemptioner, who 
wishes to redeem, must pay the purchaser the amount of 
his purchase, with one per cent per month thereon up to 
the time of redemption, together with the amount of any 
assessment or taxes which the purchaser may have paid 
on the property after purchase, and interest on such amount. 
The purchaser from whom redemption is made may also 
be a creditor having a lien other than the judgment under 



NOTES AND MORTGAGES. 415 

which he purchased, and if this Hen was prior to the hen 
of the person who seeks to redeem from him, he must be 
paid the amount of his Hen, with interest, in addition to 
the amount of his purchase. When property has been once 
redeemed, it may be again redeemed by another person 
within sixty days after the last redemption, by paying the 
amount paid on the last redemption, with two per cent 
additional, and any assessment or taxes on the property 
which the last redemptioner may have paid, and interest; 
and other redemptioners may in like manner redeem again 
and again, by making similar payments. Written notice 
of redemption must be given to the officer making the sale 
and a duplicate filed with the Recorder of the county. No 
form of written notice is here given, for the reason that it 
is not safe for a redemptioner to attempt to fill out a blank 
notice and use it himself, without the services of a lawyer. 
Knowing his rights, the redemptioner should seek the serv- 
ices of a competent lawyer, to prepare and serve the neces- 
sary notice and make the proper tenders of money in a 
lawful manner. 

Code of Civil Procedure, Sections 702, 703. 

Section 809.— THE SHERIFF'S DEED.— If no redemp- 
tion is made within twelve months after the sale, the pur- 
chaser or his assignee is entitled to a Sheriff's deed. If 
redeemed, whenever sixty days have elapsed, and no other 
redemption has been made, and the time for redemption 
has expired, the last redemptioner or his assignee is entitled 
to a Sherifif's deed. But in all cases the judgment debtor 
has the entire period of twelve months from the date of 
the sale to redeem the property. If the debtor redeems, 
the efifect of the sale is terminated, and he is restored to his 
estate. 

Code of Civil Procedure, Section 703. 

Section 810.— DEFICIENCY JUDGMENT.— If after the 
sale of mortgaged property the proceeds are insufficient to 



416 BUSINE:SS laws I^OR business MliN. 

pay the debt, and a balance still remains due, a judgment 
is docketed by the Clerk of the court for such balance 
against the defendants personally liable for the debt. Such 
deficiency judgment then becomes a lien against the real 
estate of the judgment debtor. 

Code of Civil Procedure, Section 726. 

Section 811.— POSSESSION OF PROPERTY DUR- 
ING FORECLOSURE PROCEEDINGS.— Generally the 
mortgagor remains in possession of the mortgaged property 
during foreclosure proceedings, and it is only under pe- 
culiar circumstances that the court will disturb his pos- 
session. Where it appears that the mortgaged property is 
in danger of being lost, removed, or materially injured, or 
where it appears that the conditions of the mortgage have 
not been performed, and that the property is insufficient 
to discharge the mortgage debt, the Superior Court has 
the power to appoint a Receiver, into whose hands the 
property is placed while the suit is going on. 
Code of Civil Procedure, Section 564. 

Section 812.— POSSESSION OF REAL PROPERTY 
DURING TIME FOR REDEMPTION.— It has been 
shown that there is no redemption of personal property 
sold under foreclosure, but that a redemption of real prop- 
erty is allowed, and that the time within which redemption 
may be made is twelve months. During this period of 
twelve months allowed for redemption the mortgagor has 
the right to remain in possession of the mortgaged premises, 
and during this time he is entitled to use the same and take 
the proceeds thereof. 

Section 813.— RIGHT TO RENTS AND PROFITS.— 

Where the mortgaged property is occupied by a tenant, the 
purchaser, from the time of the sale until redemption, is 
entitled to receive the rents or the value of the use and 
occupation of the property. Where a person other than the 



NOTES AND MORTGAGES. 417 

judgment debtor redeems, he is entitled to receive the rents 
until another redemption takes place. But all rents or 
profits collected by the judgment creditor or by a purchaser 
must be credited upon and deducted from the redemption 
money to be paid. 

Code of Civil Procedure, Section 707. 

Section 814.— WHO MUST PAY FOR IMPROVE- 
MENTS MADE DURING FORECLOSURE PRO- 
CEEDINGS. — Sometimes the mortgagee gets possession 
of the premises, either by consent or by force, and succeeds 
in retaining such possession during foreclosure proceedings. 
Then the question arises. Who is to pay for improvements 
to the property made b}^ the mortgagee in possession? In 
California the law is, that where a mortgagee is in posses- 
sion, and makes improvements w^ithout the consent of the 
mortgagor, he will not be allowed anything for them further 
than is proper to keep the premises in necessary repair; 
therefore, if a mortgagee in possession should build a new 
house on the land, or clear uncultivated land and put it 
into a state of cultivation, or make any other improvements 
not necessary to keep the premises in repair, he must stand 
the expense himself, and cannot recover from the mort- 
gagor or any redemptioner the cost of such improvements. 
The reason for this rule is, that while unreasonable im- 
provements may be of benefit to the estate, yet the mort- 
gagee has no right to impose them upon the owner and 
thus increase the burden of redeeming. 

Section 815.— HOVv^ TO COLLECT A NOTE WHEN 
MAKER IS DEAD.— If the maker of a note dies before 
it becomes due, the liolder may collect it from the maker's 
estate. If the estate is of a value less than $10,000, a claim 
for the amount due on the note must be presented to the 
executor or administrator within four months after the first 
publication of notice to creditors. If the estate is of a 
value of $10,000 or over, a claim for the amount due on 

27 



418 BUSINESS LAWS I^OR BUSINESS MEN. 

the note must be presented to the executor or administrator 
within ten months after the first pubHcation of notice to 
creditors. If the executor or administrator allows the 
claim, it is then presented to the Judge of the Probate Court 
for his allowance, and when allowed it is filed in the Clerk's 
ofiice, and becomes an acknowledged debt of the estate, 
which the executor or administrator will be bound to pay 
in the course of the administration of the estate. When 
a claim is rejected, either by the executor or administra- 
tor, or by the Judge of the court, the holder must bring 
suit against the executor or administrator within three 
months after the date of its rejection, if it be then due, or 
within two months after it becomes due, otherwise the 
claim will be forever barred. 

Code of Civil Procedure, Section 1498. 

Section 816.— EXCUSE FOR NOT PRESENTING 
CLAIM IN TIME.— When the claimant was out of the 
State during the publication of notice to creditors, and 
makes affidavit to the fact, and that he had no notice, this 
will be an excuse for not presenting his claim against an 
estate in time, and he will be allowed to present the claim 
to the executor or administrator at any time before a decree 
of distribution of the estate is entered. 

Code of Civil Procedure, Section 1493. 

Section 817.— FORECLOSURE OF MORTGAGE 
WHEN THE MAKER IS DEAD.— A mortgage may be 
foreclosed, even though the maker is dead, by a suit against 
the executor or administrator of his estate. But a claim 
against the estate must be presented to the executor or 
administrator if the mortgagee wishes to recover attorney 
fees. If he does not present his claim for the amount due, 
he may still foreclose his mortgage, but he cannot recover 
fees paid to his attorney. 

Section 818.— FORECLOSURE OF MORTGAGE PAY- 
ABLE IN INSTALLMENTS.— If the debt for which the 



NOTES AND MORTGAGES. ril9 

mortgage is held is not all due, as where a note is payable 
in installments, and foreclosure is had for failure to pay 
an installment due, so soon as sufficient of the property has 
been sold to pay the amount due, with costs, the sale must 
cease; and afterwards, as often as more becomes due, for 
principal or interest, the court may, on motion, order more 
to be sold. But if the property cannot be sold in portions, 
without injury to the parties, the whole may be ordered 
to be sold in the first instance, and the entire debt and 
costs paid; but where this is done there will be a rebate 
of interest on installments not yet due. 

Code of Civil Procedure, Section 728. 

Section 819.— COLLECTION OF LOST OR DE- 
STROYED NOTE.— The amount due on a note may be 
collected, notwithstanding the note may have been lost or 
destroyed. If the note is lost or destroyed, then the holder 
must give a bond, executed by himself and two sufficient 
sureties, to indemnify the party paying the note against 
any lawful claim which any other person may make upon it. 
Civil Code, Section 3137. 

Section 820.— NOTE MADE BY PARTNERS.— A note 
may be made by partners for the debts of the firm, or in 
the usual course of business of the firm, for goods, or ad- 
vancements, or as security for a loan to the firm. One 
partner may execute the note in the firm name, and all the 
partners will be bound by it, for each partner has an equal 
right, so far as third parties are concerned, to bind the 
firm by acts and conduct in the usual course of its business. 

Section 821.— LIABILITY OF PARTNERS ON PART- 
NERSHIP NOTE.— Every general partner is liable to 
third persons for all the obligations of the partnership, 
jointly with his copartners. Therefore, a promissory note, 
executed for the firm, makes each partner liable to pay the 
note. The partnership property may be taken for the pay- 



420 busine:ss laws for business men. 

ment cf the debt, and the property of each partner may 
also be taken, if the property of the firm is not sufficient. 

Section 821a.— ASSIGNMENT OF MORTGAGE.— A 

mortgage may be assigned, and the assignee will then have 
the same rights as the original mortgagee. The assign- 
ment must be in writing, and must be signed and acknowl- 
edged by the person making the assignment. The follow- 
ing is a good form of assignment of mortgage, which must 
be acknowledged in the same manner as a mortgage is 
acknowledged : — 

ASSIGNMENT OF MORTGAGE. 

Know All Men by These Presents : — That , 

of the County of , State of California, the 

party of the first part, for and in consideration of the sum 

of Dollars, Gold Coin of the United States of 

America, to him in hand paid by 

of the County of , State of California, 

the party of the second part, the receipt whereof is hereby 
acknowledged, does by these presents, grant, bargain, sell, 
assign, transfer, and set over, unto the said party of the sec- 
ond part, a certain indenture of mortgage bearing date the 

day of , IQO. . , made and executed by 

to the said party of the first part, 

and recorded in the office of the County Recorder of the 

County of , State of California, in book 

of mortgages, page . . . . , on the day of , 

190. ., at minutes past o'clock .... M. 

Together with the promissory note therein described, and 
the money due and to grow due thereon, with the interest. 

And the said party of the first part does hereby make, 
constitute, and appoint the said party of the second part 
his true and lawful attorney, irrevocable, in his name or 
otherwise, but at the proper costs and charges of the said 
party of the second part, to have, use, and take all lawful 
ways and means for the recovery of the said money and 
interest ; and in case of payment to discharge the same as 
fully as the said party of the first part might or could do if 
these presents were not made. 

In witness whereof the said party of the first part has 

hereunto set his hand and seal this day of . . 

190. . 

(Sea:;. 



PART IV 



ATTACHMENTS AND EXECUTIONS 

Attachments 

Section 822.— ATTACHMENT OF DEBTOR'S PROP- 
ERTY. — A creditor, in a suit to collect -a bill, account, or 
promissory note not secured by mortgage, can attach the 
property of his debtor. The court in which the suit is 
brought will issue the writ of attachment, to be placed in 
the hands of an officer for service, at the time the summons 
is issued in the suit, or at any time afterward before judg- 
ment is given. Always, the plaintiff in the suit must give 
bond, usually in the sum of two hundred dollars, when the 
suit is in the Superior Court, to the effect that if the de- 
fendant recover judgment the plaintiff will pay all costs 
that may be awarded to the defendant and all damages 
which he may sustain by reason of the attachment, not 
exceeding the sum specified in the bond. The bond must 
be signed by two or more sureties. Upon the filing of the 
bond tl>e Clerk of the Superior Court, if the suit is in that 
court, or the Justice of the Peace, if the suit is before a 
Justice, will issue a writ of attachment. The bond in a 
Justice Court is usually in the sum of fifty dollars. When 
issued, the writ of attachment is placed in the hands of the 
Sheriff or a Consta.ble for service. 

Code of Civil Procedure, Sections 538, 539, 866, 
867. 

Section 823.— WHAT PROPERTY CAN BE AT- 
TACHED. — Real estate belonging to the debtor, whether 
standing upon the records of the county in his name or 

(421) 



422 BUSINi:SS LAWS I^OR BUSINE:SS MEN. 

in the name of another ; personal property of all kinds ; 
corporation stocks or shares ; money owing to the debtor 
by any person, — all these may be attached as security for 
the payment of the judgment which the creditor expects 
to obtain when he sues the debtor to collect the amount 
due from him. 

Section 824.— WHAT PROPERTY IS EXEMPT 
FROM ATTACHMENT OR EXECUTION.— The law 

of California singles out certain property of the debtor, and 
says that it shall not be taken for a debt. This it does to 
protect the unfortunate and the improvident, and to secure 
to the family of the debtor provision at least for temporary 
wants. Therefore, the law states that certain property of 
the debtor shall be exempt, no matter how pressing his 
debts or how eager his creditors may be. An attachment 
cannot hold, nor can a sale on execution be Had, of any of 
the following property if the owner objects: (i) — Chairs, 
tables, desks, and books, to the value of $200, belonging 
to the judgment debtor. (2) — Necessary household, table, 
and kitchen furniture, belonging to the judgment debtor, 
including one sewing-machine, stove, stovepipes, and fur- 
niture, wearing apparel, beds, bedding, and bedsteads, 
hanging pictures, oil paintings and drawings, drawn or 
painted by any member of the family, and family portraits 
and their necessary frames, provisions and fuel actually 
provided for individual or family use sufficient for three 
months, and three cows and their sucking calves, four hogs 
with their sucking pigs, and food for such cows and hogs 
for one month ; also one piano, one shotgun, and one rifle. 
(3) — The farming utensils or implements of husbandry of 
the judgment debtor, not exceeding in value the sum of one 
thousand dollars ; also, two oxen, or two horses, or two 
mules, and their harness, one cart or buggy and two wag- 
ons, and food for such oxen, horses, or mules for one month ; 
also, all seed, grain, or vegetables actually provided, re- 
served, or on hand for the purpose of planting or sowing 



ATTACH MKNTS AND KXKCUTIONS. 423 

at any time within the ensuing six months not exceeding 
in value the sum of two hundred dollars ; 75 bee-hives ; 
and one horse and vehicle belonging to any person who 
is maimed and crippled, if same is necessary in his busi- 
ness. (4) — The tools or implements of a mechanic or 
artisan, necessary to carry on his trade ; the notarial seal; 
records, and office furniture of a Notary Public ; the instru- 
ments and chest of a surgeon, physician, surveyor, or 
dentist, necessary to the exercise of his profession, with 
his professional library, and necessary office furniture ; the 
professional libraries of attorneys, judges, ministers of the 
gospel, editors, school-teachers, and music teachers, and 
their necessary office furniture, including one safe and one 
typewriter; the musical instruments of music teachers 
actually used by them in giving instructions ; all the in- 
dexes, abstracts, books, papers, maps, and office furniture 
of a searcher of records, necessary to be used in his pro- 
fession; the typewriters, or other mechanical contrivances 
employed for writing in type, actually used by the owner 
thereof for making his living; also, one bicycle, when the 
same is used by its owner for the purpose of carrying on 
his regular business, or when the same is used for the pur- 
pose of transporting the owner to and from his place of 
business. (5) — The cabin or dwelling of a miner, not ex- 
ceeding in value the sum of five hundred dollars ; also his 
sluices, j)ipes, hose, windlass, derrick, cars, pumps, tools, 
implements and appliances, necessary for carrying on any 
mining operations, not exceeding in value the aggregate sum 
of five hundred dollars ; and two horses, mules, or oxen, 
with their harness, and food for such horses, mules, or oxen 
for one month, when necessary to be used on any whim, 
windlass, derrick, car, pump, or hoisting gear; and also his 
mining claim, actually worked by him, not exceeding in 
value the sum of one thousand dollars. (6) — Two horses, 
two oxen, or two mules, and their harness, and one cart 
or wagon, one dray or truck, one coupe, one hack or car- 
riage, for one or two horses, by the use of which a cartman, 



424 BUSINESS LAWS FOR BUSINESS MEN. 

drayman, truckman, huckster, peddler, hackman, teamster, 
or other laborer habitually earns his living; and one horse, 
with vehicle and harness or other equipments, used by a 
physician, surgeon, constable, or minister of the gospel, in 
the legitimate practice of his profession or business ; with 
food for such oxen, horses, or mules, for one month. (7) 
— One fishing boat and net, not exceeding the total value 
of five hundred dollars, the property of any fisherman, by 
the lawful use of which he earns his livelihood. (8) — Poul- 
try not exceeding in value seventy-five dollars. (9) — The 
wages and earnings of all seamen, sea-going fishermen, and 
sealers, not exceeding three hundred dollars, regardless of 
where or when earned, and in addition to all other exemp- 
tions otherwise provided by any law. (10) — The earnings 
of the judgment debtor for his personal services rendered 
at any time within thirty days next preceding the levy of 
execution or attachment, when it appears by the debtor's 
affidavit or otherwise that such earnings are necessary for 
the use of his family, residing in this State, supported in 
whole or in part by his labor; but where debts are incurred 
by any such person, or his wife or family, for the common 
necessaries of life, or have been incurred at a time when 
the debtor had no family residing in this State supported 
in whole or in part by his labor, the one-half of such earn- 
ings above mentioned is nevertheless subject to attachment 
or execution, to satisfy debts so incurred. (11) — The 
shares held by a member of an incorporated homestead 
association, not exceeding in value one thousand dollars, 
if the person holding the shares is not the owner of a home- 
stead under the laws of this State. (12) — All the nautical 
instruments and wearing apparel of any master, officer, or 
seaman of any steamer or other vessel. (13) — All fire 
engines, hooks, and ladders, with the carts, trucks, and car- 
riages, hose, buckets, implements, and apparatus there- 
unto appertaining, and all furniture and uniforms of any 
fire company or department organized under any law of 
this State. (14) — All arms, uniforms, and accoutrements 



ATTACHMENTS AND EXECUTIONS. 425 

required by law to be kept by any person, and also one 
gun, to be selected by the debtor. (15) — All court-houses, 
jails, public offices and buildings, lots, grounds, and per- 
sonal property ; the fixtures, furniture, books, papers, and 
appurtenances belonging and pertaining to jails and pub- 
lic offices of any county of this State ; and all cemeteries, 
public squares, parks, and places, public buildings, town 
halls, markets, buildings for the use of fire departments 
and military organizations, and the lots and grounds thereto 
belonging, owned or held by any town or incorporated city, 
or dedicated by such town or city to health, ornament, or 
public use, or for the use of any fire or military company 
organized under the laws of this State. (16) — All mate- 
rial not exceeding one thousand dollars in value, purchased 
in good faith for use in the construction, alteration, or 
repair of any building, mining claim, or other improvements, 
as long as in good faith the same is about to be applied 10 
the construction, alteration, or repair of such building, 
mining claim, or other improvement. (17) — All machinery, 
tools, and implements necessary in and for boring, sinking, 
putting down, and constructing surface or artesian wells, 
also, the engines necessary for operating such machinery, 
implements, tools, etc.; also, all trucks necessary for the 
transportation of such machinery, tools, implements, en- 
gines, etc. ; provided, that the value of all the articles ex- 
empted under this subdivision shall not exceed one thou- 
sand dollars. (18) — All moneys, benefits, privileges, or 
immunities accruing or in any manner growing out of any 
life insurance, if the annual premiums paid do not exceed 
five hundred dollars, and if they exceed that sum, a like 
exemption exists, bearing the same proportion to the 
moneys, benefits, privileges, and immunities so accruing 
or growing out of such insurance that five hundred dollars 
bears to the whole annual premiums paid. (19) — Shares 
of stock in any building and loan association to the value 
of one thousand dollars. No article, however, or species 
of property mentioned above, is exempt from execution 



426 BUSINESS LAWS FOR BUSIN:ESS MlSN. 

issued upon a judgment recovered for its price, or upon 
a judgment of foreclosure of a mortgage or other lien 
thereon. (20) — A United States homestead cannot be at- 
tached or sold under execution for any debt contracted 
prior to proving up and obtaining title to the land. 
Statutes of 1903, page 114. 

Section 825.— MORTGAGED PROPERTY MAY BE 
ATTACHED. — Property, real or personal, which is mort- 
gaged to another person, may be attached in a suit by a 
creditor, but the lien of the attachment is subject to the 
mortgage. 

Section 826.— CREDITOR LIABLE FOR UNLAW- 
FUL ATTACHMENT.— A creditor who makes an un- 
lawful attachment, or causes it to be made, will be liable 
in damages for all injury done to the person whose property 
is attached. If the holder of an obligation sues upon it, 
and causes an attachment to be issued and placed upon 
property of the debtor, as upon household furniture, or 
farming utensils, or horses, or cows, exempt by law from 
execution, he will be liable for all damages sustained by 
the unlawful seizure. His sureties on the attachment bond 
are liable to the extent of their bonds only, but he is liable 
to the full extent of the injury. The debtor may have the 
attachment released, upon the ground that the property 
attached is exempt, and bring a suit for damages against 
the creditor and his bondsmen. 

Section 827.— CREDITOR ATTACHING PERSONAL 
PROPERTY MUST PAY MORTGAGE.— It has already 
been shown that mortgaged property may be attached by 
a creditor of the owner, subject to the mortgage. Per- 
sonal property mortgaged may be taken under attachment 
or execution issued at the suit of a creditor of a m.ortgagor; 
but before the property can be taken, the officer levying 
the attachment or execution must pay or tender to the 



ATTACHMENTS AND EXECUTIONS. 427 

mortgagee the amount of the mortgage debt and interest, 
or must deposit the money with the County Clerk or Treas- 
urer, payable to the order of the mortgagee. 
Civil Code, Section 2969. 

Section 828.— GARNISHMENT.— There are certain ef- 
fects of a debtor which cannot be seized and taken into 
the custody of the officer, but which may still be rendered 
liable to the payment of the debt, such as money owing 
to the debtor by a third person, or property in the hands 
of a third person belonging to the debtor. In a suit by 
the creditor against the debtor, the officer serves a notice 
upon the person owing the debtor, or having property of 
the debtor in his hands, that such property is attached, 
and this is called garnishment. The person upon wdiom 
the notice is served is called the garnishee. Thereafter, 
he cannot pay his debt to the defendant, nor deliver the 
property to him, but must hold it to await the result of 
the suit. In this State, w^hen required by the officer the 
garnishee must make a statement of the amount owing 
by him to the defendant, or showing the character and 
description of the property in his hands belonging to the 
defendant. 

Section 829.— FOR WHAT PROPERTY GARNISHEE 
LIABLE. — The garnishee will be held liable for all per- 
sonal property in his hands belonging to the defendant 
which is capable of being seized and sold upon execution. 
The garnishee will be liable for money in his hands 
belonging to the defendant, and a garnishment may be 
levied upon a bank or corporation, as well as upon an indi- 
vidual. The property must be in the actual possession of 
the garnishee, or within his control, so that he may be able 
to turn it over to the officer on execution. 

Section 830.— MONEY DUE AS SALARY TO PUBLIC 

OFFICER. — The salary of a public officer can be attached 



428 BUSINESS LAWS FOR BUSINESS MEN. 

or garnisheed. When a judgment is obtained against a pub- 
lic officer, a transcript of it may be filed with the State Con- 
troller or County or City Auditor, and so much of the 
officer's salary as is not exempt from execution shall be 
then paid over to the judgment debtor. (Statutes of 
1903, page 362.) A decision has been made by the 
Supreme Court in a test case under the statute of 
1903. A suit was brought in San Francisco to compel 
the Auditor to allows the salary of a public officer, but 
he refused on the ground that a part of the money had 
been attached under the new law. The Supreme Court 
decided that the law is constitutional, and that it will stand 
good as to all public officers and employees created or 
provided for by the Legislature. Therefore, when the 
Auditor pays the money due, from the State, or city, or 
county, into court, so much as is not exempt from execu- 
tion must be paid to the judgment creditor. (Decided by 
the Supreme Court of California, in the case of Ruperich 
vs. Baehr, which decision is printed in Volume 27 of Cali- 
fornia Decisions, No. 1465, page 359.) 

Section 831.— MONEY IN THE HANDS OF THE 
LAW. — Money in the hands of the law, as money in the 
hands of a sheriff, or constable, or money deposited with 
a clerk of court to await the determination of a suit, or 
money in the hands of a Receiver appointed by the court, 
cannot be taken by garnishment or attachment; for all 
such property is in the custody of the law, and until the 
law has done with it, no interference from any other source 
will be tolerated or allowed. 

Section 832.— ATTACHMENT OF PARTNERSHIP 
PROPERTY. — Partnership property may always be at- 
tached for partnership debts. But a more serious question 
arises, where one partner owes debts and is sued by his 



ATTACH ME:nTS and EXECUTIONS. 429 

creditor, outside of the partnership business. The deci- 
sions of the courts in different States have not been uni- 
form, but in Cahfornia the law appears to be settled, that 
a creditor of one partner may have an attachment levied 
upon the partnership property. The sheriff must take the 
whole property into his possession, but he cannot sell on 
execution the interests of both partners ; he can only sell 
under the execution of the interest of the partner against 
whom the judgment was obtained. 

Section 833.— DISSOLUTION OF ATTACHMENT.— 

If an attachment has been improperly or irregularly issued, 
by the court in which the suit was brought, it will be dis- 
charged on motion of the defendant. If an attachment is 
issued in a case where the law does not provide for an 
attachment, or if the plaintiff's complaint does not state a 
cause of action, or if other necessary papers essential to 
obtain a Writ of Attachment are fatally defective, the at- 
tachment will be held to be improperly or irregularly issued 
and the defendant will have a right to ask for the discharge 
of the attachment. 

Section 834.— BOND FOR RELEASE OF ATTACHED 
PROPERTY. — The defendant in a suit, whose property 
is attached, may have the attachment released by giving 
a bond, in a sum to be fixed by the court, with at least 
two sureties, as security that the property released will be 
re-delivered to the proper officer if the plaintiff recover a 
judgment in the action; or that, if the property is not 
turned over to the officer, that the sureties will pay to the 
plaintiff the full value of the property released. 
Code of Civil Procedure, Section 555. 

Judgments and Executions 

Section 835.— JUDGMENTS.— Whether any property is 
attached or not, a judgment may be obtained for the amount 
due, and costs of suit, and upon the judgment an execution 



430 BUSINESS LAWS I^OR BUSINESS MEN. 

is issued from the court in which suit is brought, directed 
to the Sheriff, and commanding that officer to sell enough 
of the debtor's property to pay the debt. All property not 
exempt from execution may be sold by the Sheriff and ap- 
plied to the payment of the judgment. All sales of prop- 
erty under execution are made at public auction to the 
highest bidder. 

Section 836.— JUDGMENT A LIEN ON REAL PROP- 
ERTY. — When a judgment is rendered in a suit in the 
Superior Court, the Clerk of the Court enters the judgment 
in his official records, and makes up what is called a Judg- 
ment Roll, attaching together and filing the pleadings and 
certain other papers, for that purpose. Immediately after 
filing the Judgment Roll, the Clerk of the Court makes the 
proper entry of the judgment in the docket kept by him; 
and from the time the judgment is docketed it becomes a 
lien upon all the real property of the judgment debtor not 
exempt from execution in the county, owned by him at the 
time or which he may afterward acquire, until the lien 
ceases. 

Code of Civil Procedure, Sections 670, 671. 

Section 837.— HOW LONG JUDGMENT LIEN CON- 
TINUES. — The lien of a judgment docketed in the Superior 
Court continues for five years, on real property of the 
judgment debtor in the county. 

Section 838.— JUDGMENT LIEN ON PROPERTY IN 
ANOTHER COUNTY.— A transcript of the original 
docket of the judgment, certified by the Clerk, may be filed 
with the Recorder of any other county, and from the time 
of the filing the judgment becomes a lien upon all the real 
property of the judgment debtor not exempt from execu- 
tion in such other county, and this lien, unless the judg- 
ment be previously satisfied, continues for two years. 
Code of Civil Procedure, Section 674. 



ATTACH ME:nTS and KX^CUTIONS. 431 

Section 839.— HOW JUSTICE COURT JUDGMENT IS 
MADE LIEN ON REAL PROPERTY.— Reference has 

been made in the preceding Sections to the Hen of judg- 
ments obtained in the Superior Court. But a Hen upon the 
real property of the debtor may also be secured on a Justice 
Court judgment, by following certain requirements of the 
law of California. A person obtaining a judgment in the 
Justice Court, if he wishes to make it a lien upon the real 
property of his debtor, must ask the Justice to give him an 
abstract of the judgment, which it is the duty of the Justice 
to furnish on demand. This abstract of the judgment must 
be filed in the office of the Recorder of the county in which 
the land of the debtor is situated, and when so filed, and 
from the time of filing, the judgment becomes a lien on 
such property. This lien continues for two years, unless 
the judgment be previously satisfied. A judgment ren- 
dered in a Justice's Court creates no lien upon any lands 
of the defendant, unless the abstract above mentioned is 
filed in the ofhce of the Recorder of the county in which 
the lands are situated. 

Code of Civil Procedure, Sections 897, 900. 

Section 840.— TIME WITHIN WHICH EXECUTION 
MAY ISSUE. — The party in whose favor judgment is given 
may, at any time within five years after the judgment is 
entered, have a writ of execution issued for its enforcement. 

Section 841.— EXEMPTION MUST BE CLAIMED BY 
DEBTOR. — While the law exempts certain property of a 
judgment debtor from execution and forced sale, such ex- 
emption is a personal privilege, which may be waived by the 
debtor ; and a failure to claim the property as exempt, when 
levied on to satisfy a judgment against him, Avithin a rea- 
sonable time thereafter, is a waiver of the exemption right ; 
and the officer selling exempt property Avithout such claim 
of exemption is not liable for its value. 



PART V 



LAST WILLS AND TESTAMENTS 

Section 842.— MAKING A Vv^ILL.— The law vof Califor- 
nia designs to encourage the making of wills, and whenever 
the last will and testament of a deceased person — who in 
his lifetime thus endeavored to direct the disposition of 
his property when he should have done with the business 
of this world — whenever such an instrument has come be- 
fore the Supreme Court of this State, and has become the 
subject of attack by dissatisfied relatives, the law relative 
to the making of wills has always been liberally construed, 
with a sincere desire to carry out the intentions of the 
testator. The courts of late years have come to look with 
more or less suspicion upon the many attempts to break 
wills made in this State. Disgraceful scandals have been 
the aftermath of so many will contests, and bribery and 
perjury of witnesses such frequent circumstances, that the 
Supreme Court alone has been able to stem the tide of 
corruption which has followed many of California's rich 
men to the grave. Now, the frequent decisions of the 
Supreme Court in favor of the validity of wills, and the 
fearless rulings of some Judges of the Superior Court, 
setting aside verdicts of juries when evidently induced by 
passion and prejudice, are having a good effect. The num- 
ber of will contests may not be decreased, as long as 
credulous clients have money to pay eager lawyers ; but 
the people of California may at all events feel greater 
security in the irrevocable character of last wills and testa- 
ments. And whether a person be rich or poor, Avhether 
the estate disposed of by will be large or small, it is the 
(432) 



LAST WILLS AND TKSTAMI^NTS. 433 

intention of the law of California that the solemn act thus 
expressed shall be protected and enforced. 

Section 843.— WHO MAY MAKE A WILL.— Every 
person in California over the age of 18 years, and of sound 
mind, may make a last will, and thus dispose of all his 
estate, real and personal. 

Section 844.— WILL OF MARRIED WOMAN.— A 

married woman may dispose of all her separate property 
by will, without the consent of her husband, and may alter 
or revoke the will in like manner as if she were single. 
The will of a married woman must be executed and proved 
in the same manner as other wills. 
Civil Code, Section 1273. 

Section 845.— WHAT MAY BE DISPOSED OF BY 
WILL. — Every estate and interest in real or personal 
property, to which heirs, husband, widow, or next of kin, 
if there were no will, might succeed to, may be disposed 
of by last Avill ; provided, the husband can only dispose of 
one-half of the community property by his will, the other 
half belonging to his wife at his death and not being sub- 
ject to his will; and provided, also, that the wife can only 
dispose of her separate property by her will, or such of 
the cornmunity property as may have been set aside to 
her by the judgment of a court for her support and 
maintenance. 

Civil Code, Sections 1401, 1402. 

Section 846.— WHO MAY TAKE BY WILL.— Any 

person may take property by will, except the artificial per- 
sons known as corporations. A testamentary disposition 
of property cannot in this State be made to any corpora- 
tion, except such as are formed for scientific, literary, or 
solely educational or hospital purposes; and except that 
28 



434 BUSINESS LAWS I^OR BUSINESS MEN. 

property may lawfully be willed to charitable or benevolent 
societies or corporations for use by them in the furtherance 
of their designs. But no estate, real or personal, can be 
lawfully left to any charitable or benevolent society or 
corporation, or to any person or persons in trust for char- 
itable uses, unless the will is executed at least thirty days 
before the death of the testator; and the law provides that 
bequests for charitable uses must not collectively exceed 
one-third of the estate of the testator leaving legal heirs. 
Civil Code, Sections 1275, 1313. 

Section 847.— KINDS OF WILLS.— There are three 
kinds of wills recognized by the law of California — a nun- 
cupative will; an olographic will; and a will signed by the 
testator and by attesting witnesses. 

Section 848.— NUNCUPATIVE WILLS.— The kind of 
will called "nuncupative" is only made under peculiar and 
extraordinary circumstances. A person in actual military 
service in the field, or doing duty on a ship at sea, and in 
actual contemplation, fear, or peril of death, or in expecta- 
tion of immediate death from an injury received the sam.e 
day, may make a nuncupative will. A nuncupative will is 
not required to be in writing, nor to be declared or attested 
with any formalities. To make a nuncupative will valid, 
and to entitle it to be admitted to probate, it must further 
appear that the estate bequeathed does not exceed in value 
the sum of one thousand dollars ; and two witnesses who 
were present at the making of the will must prove it, and 
one of the witnesses must have been asked by the testator 
at the time to be a witness that such was his will. 

Section 849.— OLOGRAPHIC WILLS.— An olographic 
will is one that is entirely written, dated, and signed by 
the hand of the testator himself. It is subject to no other 
form, and may be made in or out of this State, and need 



LAST WILLS AND te;stami<:nts. 435 

not be witnessed. The law must be strictly followed in 
making such a will. It may be written on any kind of 
paper, and is not required to be in any particular form ; 
but it must be entirely in the testator's handwriting. If 
a person, intending to make an olographic will, dictates to 
some one who writes the body of it for him and then signs 
it himself, it is not a valid wdll, for the law expressly de- 
clares that he must write it all himself. So, if a person 
uses a blank form, and fills out the blanks in his own hand- 
writmg, and signs his name, yet the law has not been com- 
plied with, and the instrument is void as a will. Every 
word and every figure in it, to be a valid olographic will, 
must be in the handAvriting of the person making it. If 
any part of it is in the handw^riting of any other person, 
or if any part of it is printed, it will be illegal and invalid. 
In one case in California it was decided that nothing more 
than the figures "1880" in print, after "April i" in the 
testator's handwriting, made the document illegal as an 
olographic will. Not only must the document be entirely 
in the handwriting of the person making an olographic will, 
but it must always be dated. If otherwise lawfully made, 
that is, written and signed by the testator himself, but 
with the date omitted, the paper is invalid as a will. As 
before stated, a will of this kind need not be in any par- 
ticular form. It may even be in the form of a letter, and 
if it appears that the writer intended to thus make a testa- 
mentary disposition of his property, it will be considered 
as his last will and testament. When a will is thus law- 
fully made, entirely written, dated, and signed by the hand 
of the testator himself, it constitutes the most satisfactory 
manner in which a will can be made, and is less liable to 
the attacks of will-breaking lawyers than is a formal will, 
written and executed under the supervision of a legal 
adviser. For olographic wills are usually brief, whereas 
a will in the handwriting of a lawyer is apt to have its 
length gauged by the size of the estate or the amount of 



436 BUSINESS LAWS FOR BUSINESS M^N. 

the fee ; and, too, an olographic will is free from the 
technical terms and legal phrases which never cease to stir 
up controversies in the courts. For these reasons, an olo- 
graphic will, when made by a person of ordinary intelli- 
gence, is the kind to be preferred. 
Civil Code, Section 1277. 

Section 850.— FORM OF OLOGRAPHIC WILL.— The 
following is a form of olographic will, which meets the 
requirements of the law. The date, names, amounts, and 
the signature must be filled in, and the whole written by 
the maker of the will alone : — 

Cal., , 190. . 

I declare this to be my last will and testament. I give 

and bequeath to the sum of 

Dollars ; I give and bequeath to 

the sum of 

Dollars ; I give and bequeath to 

and all the residue of my 

property, of whatever kind and wherever situated, share 
and share alike. 



The foregoing form will be as good as any other; and, 
indeed, any form is good as an olographic will, if the in- 
tention of the writer to make it his will appears in it, and 
the disposition which he desires to make of his property. 

Section 851.— WILL ATTESTED BY WITNESSES.— 

A will which is not in the handwriting of the maker must 
be executed and attested as follows: (i) It must be sub- 
scribed at the end by the testator himself, or some person 
in his presence and by his direction must subscribe his 
name to it; (2) The subscription must be made in the 
presence of the attesting witnesses, or be acknowledged 
by the maker to them to have been made by him or by his 
authority; (3) The maker must, at the time of subscribing 



LAST -vVlLUi AND TlCSTAMENTS. 437 

or acknoAviedging the will, declare to the attesting wit- 
nesses that the instrument is his will ; (4) There must be 
two attesting witnesses to a will, and each of them must 
sign the will as a witness, at the end of it, at the testator's 
request and in his presence. The testator must either sign 
his name at the end of the will, or have it signed by some 
one in his presence and at his direction. 
Civil Code, Section 1276. 

Section 852.— GIFTS TO SUBSCRIBING WIT- 
NESSES. — All legacies and gifts of any kind, made or 
given in any will to a subscribing witness, are void, unless 
there are two other competent subscribing witnesses to 
the will. 

Civil Code, Section 1282. 

Section 853.— HOW A WILL IS REVOKED.— The law 

declares what acts work the revocation of a will in this 
State. 

A will is revoked by a later will, declaring the revocation 
of the prior one. 

A will is revoked by being burned, torn, canceled, ob- 
literated, or destroyed, with the intent and purpose of re- 
voking it, by the testator himself, or by some person in 
his presence and by his direction. 

When a will is canceled or destroyed by any other per- 
son than the testator, the direction of the testator, and the 
fact of such cancellation or destruction, must be proved 
by two witnesses. 

A prior will is not revoked by a subsequent will, unless 
the latter contains an express revocation, or provisions 
wholly inconsistent with the terms of the former will ; but 
in other cases the prior will remains effectual so far as 
consistent with the provisions of the subsequent will 
Civil Code, Sections 1292, 1293, 1296. 



438 BUSINESS LAWS FOR BUSINESS MEN. 

Section 854.— REVOCATION BY MARRIAGE.— It 

after having made a will, the testator marries, and has 
issue of such marriage, born either in his lifetime or after 
his death, and the wife or issue survives him, the will is 
revoked, unless provision has been made for such issue by 
some settlement, or unless such issue are provided for in 
the will, or mentioned in the will so as to show an inten- 
tion not to make provision for the child. 

If, after making a will, the testator marries, and the wife 
survives the testator, the will is revoked, unless provision 
has been made for her by marriage contract, or unless she 
is provided for in the will, or mentioned in the will so as 
to show an intention not to make provision for her. 

A will, executed by an unmarried woman, is revoked by 
her subsequent marriage, and is not revived by the death 
of her husband. 

Civil Code, Sections 1298, 1299, 1300. 

Section 855.— SHARE OF CHILD BORN AFTER 
THE WILL. — Whenever a testator has a child born after 
the making of his will, either in his lifetime or after his 
death, and dies leaving such child unprovided for by any set- 
tlement, and neither provided for nor in any way mentioned 
in his will, the child succeeds to the same portion of the 
testator's real and personal property that he would have 
succeeded to if the testator had died intestate. 
Civil Code, Section 1306. 

Section 856.— OMISSION TO PROVIDE FOR CHIL- 
DREN. — When any testator omits to provide in his will 
for any of his children, or for the issue of any deceased 
child, unless it appears that such omission was intentional, 
the law declares that such child or the issue of such child 
must have the same share in the estate of the testator as if 
he had died intestate. But the law also provides that a 
child who has had his share of the estate advanced to him 



LAST WILL'S AND T^STAM^NTS. 439 

during the lifetime of the testator, even though not men- 
tioned in the will, is not entitled to any more. 
Civil Code, Sections 1307, 1309. 

Section 857.— CHILDREN OF DEVISEE.— When any 
estate is devised to any child, or other relation of the tes- 
tator, and the devisee dies before the testator, leaving lineal 
descendants, such descendants take the estate so given by 
the will in the same manner as the devisee would have done 
had he survived the testator. 

Civil Code, Section 13 10. 

Section 858.— WHEN WILL TAKES EFFECT.— A 

will takes effect at the testator's death. It can have no 
effect to pass any title before his death. 

Section 859.— WHEN LEGACIES ARE DUE.— Lega- 
cies are due to those entitled to them at the expiration of 
one year after the testator's death. 

Section 860.— INTEREST ON LEGACIES.— Ordinary 
legacies bear interest from the time when they become due. 
A legacy to the testator's widow bears interest from the 
date of his death. 

Section 861.— GROUNDS FOR CONTEST OF WILL. 

— The law specifies, as the grounds for the contest of a 
will, duress, menace, fraud, or undue influence ; and, also, 
it is a common ground for the contest of a wall, that the 
testator was not of sound mind. If advantage is taken of 
an old and feeble person, and the facts are misrepresented or 
concealed, or threats or fraudulent persuasions resorted to, 
by which a testator is fraudulently induced to exclude from 
his will the natural object of his bounty, whom he would 
otherwise have remembered and provided for, the law will 
interfere on behalf of the injured party and set the will 



44:0 BUSINESS LAWS ?0R BUSINESS MEN. 

aside. Yet it will require clear and convincing proof to 
set aside a will upon these grounds. 

By far the larger number of will contests are made upon 
the ground that the testator was not of sound and dis- 
posing mind, but on the contrary was afflicted with insanity. 
On this subject it may be said, that if there had not been 
so many expert witnesses the w^orld would never have 
heard of so many forms of insanity. Expert witnesses on 
insanity are ever ready to swear on either side of a will 
contest, as they happen to be first employed, and to frame 
their theories according to their interest. The Supreme 
Court of California has announced, time and time again, its 
own distrust of expert testimony, and has endeavored to be 
guided by the rules of reason and common sense in its dis- 
position of will cases. The facts must be recognized, that 
there is no satisfactory definition of insanity, either in or 
out of the medical profession ; that no man can truly mark 
the dividing line between sanity and insanity ; that a person 
may be exceedingly eccentric, and yet not be at all insane ; 
that by a ''sound mind" is meant only that a person, in order 
to make a valid will, must be of sufficient understanding to 
know the character and extent of his property, to know and 
recollect the natural objects of his bounty, to know to whom 
he wishes to leave his property, and to appreciate and know 
the character of his act when he makes his will. If this 
is the state of his mind, no eccentricity of speech or conduct, 
and no impairment of mental power, Avill have any effect to 
invalidate the solemn act of disposing of his estate by last 
will and testament. 



PART VI 



ESTRAY LAW OF CALIFORNIA 

Section 862.— TAKING UP DOMESTIC ANIMALS.— 

The law of California provides, in the Act relating to 
estrays, passed by the Legislature in 1901, that any per- 
son finding at any time any stray domestic animal or ani- 
mals upon his premises, or upon premises to which he has 
the right of possession, or upon highways adjacent thereto, 
may take up such animal or animals and have a lien thereon 
for all expenses incurred and costs in keeping and caring 
for them. No person has any right to remove animals 
from the possession of the person taking them up, until 
the costs and expenses allowed by law are paid, unless the 
animals are delivered to an officer for sale. 

Section 863.— NOTICE TO BE FILED WITH THE 
COUNTY RECORDER.— The law provides, that any per- 
son taking up an estray animal or animals must confine 
them in^a secure place, and within five days thereafter must 
file with the County Recorder of the county a notice con- 
taining a description of the animal or animals taken up, 
with the marks and brands, if they have any, together with 
the probable value of each animal, with a statement of the 
place where the animals were found and where they are 
confined. 

Section 864.— FEE FOR FILING NOTICE.— The 

County Recorder is entitled by law to a fee of fifty cents 
for filing the notice above mentioned. 

(441) 



442 busine:ss laws i^or business men. 

Section 865.— FORM OF NOTICE.— The following is 
a form of notice to be filled out by the person taking up 
estray animals, and filed with the County Recorder : — 

Notice is hereby given that I have taken up the follow- 
ing animals at my place in Township, 

County, State of California, to-wit : — 

(Here describe animals.) 

The marks and brands upon said animals are as follows, 
to-wit : — 

(Here describe marks and brands.) 

The animals are of the value 

(Here state probable value of each.) 



I found said animals at 

and have since confined them at 

(Here sign.) 



Section 866.— WHEN OWNER MAY DEMAND 

POSSESSION. — Any person claiming to own estray ani- 
mals must appear and demand possession within thirty 
days from the date of the filing of the notice above men- 
tioned, and must, at the same time, pay to the taker-up 
all damages, expenses, and costs incurred by reason of 
taking up such animals; and upon receiving such damages, 
expenses, and costs, the taker-up must, so the law pro- 
vides, immediately deliver possession of such animals to 
the party claiming them. The damages, expenses, and 
costs, to be paid to the taker-up, shall be estimated as 
follows, to-wit: (i) The total amount paid to the County 
Recorder for filing the notice ; (2) the sum of fifteen cents 
per day for keeping and care of each horse, mule, jenny, 
ass, cow, bull, ox, or steer, or calf; (3) the sum of five 



KSTRAY LAW OF CALIFORNIA. 443 

cents per day for keeping and care of each goat, sheep, 
hog, or other animals not mentioned in the law. 

Section 867.— SUIT BY OWNER.— If the owner ap- 
pears and tenders to the taker-up the amounts provided by 
the law, and the tender be refused, the party claiming the 
animals must commence a suit against the taker-up, within 
ten days thereafter, for the recovery of the possession of 
such animals. 

Section 868.— PROCEEDINGS WHEN OWNER 
DOES NOT APPEAR.— If no person appears and claims 
the animals taken up, wnthin thirty days after the filing 
of the notice, or if a person does appear and claim the 
animal or animals taken up within thirty days, but fails 
to pay to the taker-up the expenses and costs allowed by 
the law, then the taker-up must, in writing, notify a con- 
stable of the township in which said animal or animals are 
held. 

Section 869.— FORM OF NOTICE TO THE CON- 
STABLE. — The following is the form of notice to be given 
to the constable of the township, to-wit : — 

To the Constable of Township, County 

of , State of California : You are hereby 

notified^that I have taken up and am keeping at 

the following estray animals : 

(Here state number and kind of animals.) 

that on the day of , 190 .. , I 

filed with the County Recorder of County a 

notice according to law, containing a description of the 
animals taken up, with the marks and brands, and the 
probable value of each animal, and the statement of the 
place where I found them, and where I have them con- 
fined; that I paid the County Recorder fifty cents for filing 
the said notice ; that said notice was filed by said County 
Recorder on said day; that thirty days have elapsed since 



444 busine:ss laws i^or busine:ss mi:n. 

the filing of said notice, and no person has appeared and 
claimed said animals (or instead of last sentence the follow- 
ing: that appeared and claimed such ani- 
mals, but failed to pay me my expenses and costs as pro- 
vided by law, and failed to commence and prosecute an 
action against me for the possession of such animals within 
thirty days after asking for them). 



Section 870.— SALE BY CONSTABLE —The con- 
stable upon receiving the notice must immediately proceed 
to sell the animals at public sale, in the same manner as 
sales on execution, and is entitled to the same fees for 
making the sale as are provided by law for sales under 
execution. The sale by the constable will convey a good 
and valid title to the purchaser, and the owner of the ani- 
mals so sold is thereafter barred from all right to recover 
them. 

Section 871.— DISPOSITION OF MONEY FROM 
SALE. — Out of money realized from the sale of estrays, 
the law provides that the constable shall first retain his 
fees ; he must then pay to the taker-up the expenses and 
costs allowed by law, or so much as the funds in his hands 
will permit; and the surplus, if any, the constable must 
pay to the County Treasurer, to be held by the County 
Treasurer for the owner of the estrays. If any person, 
within one year thereafter, proves to the satisfaction of 
the Board of Supervisors, that he is entitled to the money 
so held by the County Treasurer, or any part of it, the 
Supervisors must order such sum to be paid over to such 
person; and if not so proven within one year, then the 
money becomes a part of the common school fund of the 
county. 

Statutes of 1901, page 603. 



PART VII 



CORPORATIONS IN CALIFORNIA 

Section 872.— NATURE OF CORPORATIONS.— The 

definition of corporations given by the law of CaUfornia is, 
**'A corporation is a creature of the law, having certain pow- 
ers and duties of a natural person." Unlike a natural per- 
son, who may act in business affairs as his individual will 
may dictate, a corporation can only act through its officers 
in the manner prescribed by the law creating it. The 
nature of a corporation is peculiar in another respect. 
While the rights and privileges of a natural person, con- 
sidered as such, will terminate by his death, the rights and 
privileges of the corporation do not end, or vary, upon the 
death or change of any of the individual members. Judge 
Kent, the eminent lecturer on law, has said that the object 
of a corporation is "to enable the members to act by one 
united will, and to continue their joint powers and property 
in the same body, undisturbed by the change of members, 
and without the necessity of perpetual conveyances, as the 
rights of members pass from one individual to another. 
All the individuals composing a corporation, and their suc- 
cessors, are considered in law but as one moral person, 
capable, under an artificial form, of taking and conveying 
property, contracting debts and duties, and of enjoying a 
variety of civil and political rights." 
Civil Code, Section 283. 

Section 873.— FOR WHAT PURPOSE CORPORA- 
TIONS MAY BE FORMED.— In California, corporations 
may be formed for any purpose for which individuals may 
lawfully associate themselves. And as individuals may 

(445) 



446 BUSINESS LAWS ^OR BUSINESS MEN. 

enter into any business transactions not prohibited by law, 
so a corporation may be formed for the purpose of carry- 
ing on any lawful business, of any kind whatever. 
Civil Code, Section 286. 

Section 874.— WHO MAY FORM A CORPORATION. 

— The law places but two restrictions upon the formation 
of corporations, respecting the persons who may organize 
them. At least five persons must join in the formation of 
a corporation, or as many more as may be desired; and, 
whether a corporation be formed by five persons, or a num- 
ber more than five, a majority of such persons must be 
residents of the State of California. Foreign corporations 
may do business in the State, but a corporation cannot be 
formed here unless a majority of the persons forming it are 
residents of the State. 

Civil Code, Section 285. 

Section 875.— ARTICLES OF INCORPORATION.— 

The instrument by which a corporation is formed is called 
"Articles of Incorporation." Articles of Incorporation must 
be prepared, setting forth : (i) The name of the corporation; 
(2) the purpose for which it is formed; (3) the place where 
its principal business is to be transacted; (4) the term for 
which the corporation is to exist; (5) the numiber of its Di- 
rectors ; (6) the amount of its capital stock, if any, and the 
number of shares into which it is divided ; (7) the amount 
actually subscribed, and by whom. 

Civil Code, Sections 289, 290. 

Section 876.— FORM OF ARTICLES OF INCOR- 
PORATION.— The following is a form of Articles of In- 
corporation, which meets the requirements of the law : — 

Articles of Incorporation. 

KNOW ALL MEN BY THESE PRESENTS: That we, 
the undersigned, have this day voluntarily associated our- 
selves together for the purpose of forming a corporation. 



CORPORATIONS IN CALIFORNIA. 447 

under the laws of the State of Cahfornia ; and we hereby 
certify, 

First — That the name of said corporation is 

(Here insert the name selected for the corporation.) 

Second — That the purposes for which it is formed are to 
carry on the business of 

(Here insert the purposes of the corporation.) 

Third — That the place where its principal business is to 
be transacted is the city of 

(Here insert the name of the place.) 

Fourth — That the term for which said corporation is to 
exist is 

(Here insert number of years.) 

years from and after the date of its incorporation. 

Fifth — That the number of Directors of said corporation 
shall be 

(Here insert number of Directors agreed upon.) 

and that the names and residence of the Directors who are 
appointed for the first year are : — 

Names. Residence. 

(Here insert names and residence of Directors.) 



Sixth — That the amount of the capital stock of said cor- 
poration shall be Dollars, divided 

into thousand shares, of the par 

value of Dollars each. 

Seventh — That the amount of said capital stock which 



448 BUSINESS LAWS I^OR BUSINESS MEN. 

has been actually subscribed is Dol- 
lars, and the following are the names of the persons by 
whom the same has been subscribed, to-wit: — 

Subscriber. Number of Shares. Amount. 



(Here insert names of subscribers, number of shares sub- 
scribed for, and amount of each subscription.) 



In Avitness whereof, we have hereunto set our hands and 
seals, this day of , 190. . 



STATE OF CALIFORNIA, ) gg 

County of ) 

On this day of ., in the year one 

thousand nine hundred and , before me, 

, a Notary Public in 

and for said county, residing therein, duly commissioned 
and sworn, personally appeared 



and , personally 

known to me to be the persons whose names are subscribed 
to the within instrument, and they each duly acknowledged 
to me that they executed the same. 

In witness whereof, I have hereunto set my hand and 
affixed my official seal, at my office in the County of 

, the day and year in this certificate first 

above written. 

Notary Public in and for the County 
of , State of California. 

Section 877.— NUMBER OF SIGNERS.— The Articles 
of Incorporation must be signed by at least five persons, 
a majority of whom must be residents of California, and 



CORPORATIONS IN CALIl^ORNIA. 449 

each of whom must make an acknowledgment before a 
Notary or other officer authorized to take acknowledgments. 
Civil Code, Section 292. 

Section 878.— FILING OF ARTICLES OF INCOR- 
PORATION. — The Articles of Incorporation, when pre- 
pared and signed and acknowledged, must be filed in the 
office of the County Clerk of the county in which the prin- 
cipal place of business is located; and a copy, certified by 
the County Clerk, must be filed in the office of the Secretary 
of State at Sacramento. 

Section 879.— CERTIFICATE OF SECRETARY OF 
STATE. — Upon receiving and filing in his office the certi- 
fied copy of the Articles of Incorporation filed with the 
County Clerk, the Secretary of State issues to the corpora- 
tion, over the great seal of the State of California^ a certifi- 
cate that a copy of the Articles containing the required 
statement of facts has been filed in his office; and from the 
time when this certificate is issued the persons signing the 
Articles of Incorporation, and their associates and suc- 
cessors, become and are created a corporation, under the 
name chosen by them. 

Civil Code, Section 296. 

Section 880.— NAME OF CORPORATION MUST BE 

NEW. — The name selected by the incorporators must be 
new ; that is, it must not have the same name as any other 
corporation before organized in this State ; nor can the name 
selected so closely resemble the name of any other existing 
corporation that it will tend to deceive; and if Articles of 
Incorporation are sent to the Secretary of State which con- 
tain the same name as an existing corporation, or a name 
so closely resembling it as tends to deceive the public, it 
will be his duty under the law to refuse to file the Articles 
or issue his certificate. 

Statutes of 1901, page 

29 



450 BUSINESS LAWS FOR BUSINESS MEN. 

Section 88i.— COST OF INCORPORATING.— The fees 
for forming a corporation, to be paid the Secretary of State, 
are as follows: (i) For filing Articles of Incorporation, if 
the capital stock amounts to twenty-five thousand dollars 
or less, fifteen dollars ; if the capital stock amounts to over 
twenty-five thousand dollars, and not over seventy-five 
thousand dollars, twenty-five dollars ; if the capital stock 
amounts to over seventy-five thousand dollars, and not over 
two hundred thousand dollars, fifty dollars; if the capital 
stock amounts to over two hundred thousand dollars, and 
not over five hundred thousand dollars, seventy-five dollars ; 
if the capital stock is over five hundred thousand dollars, 
and not over one million dollars, one hundred dollars ; if 
the capital stock is over one million dollars, fifty dollars 
additional for every five hundred thousand dollars or frac- 
tion thereof of capital stock over and above one million 
dollars. (2) For filing Articles of Incorporation without 
capital stock, except cooperative associations, five dollars. 
(3) For filing xA^rticles of Incorporation of cooperative 
associations, fifteen dollars. (4) For recording Articles of 
Incorporation, twenty cents per folio. (5) For issuing 
certificate of incorporation, three dollars. 
Statutes of 1903, page 27. 

Section 882.— LIMIT OF CORPORATE EXISTENCE. 

— A corporation, being a creature of the law, can only con- 
tinue for the length of time which the law prescribes. The 
law of California provides that the limit of time for which 
a corporation can be formed in this State is fifty years. The 
Articles of Incorporation may fix a period of existence less 
than fifty years, but cannot provide for a longer period. 
Civil Code, Section 296. 

Section 883.— EXTENDING CORPORATE EXIST- 
ENCE. — Every corporation formed for a period less than 
fifty years may, at any time prior to the expiration of the 
term of its corporate existence, extend such a term to a 



^ 



CORPORATIONS IN CALIFORNIA. 451 

period not exceeding fifty years from its formation. Such 
extension may be made at a meeting of the stockholders 
or members, called by the directors expressly for con- 
sidering the subject, if voted by stockholders representing 
two-thirds of the capital stock; or by two-thirds of the 
members ; or may be made upon the written assent of that 
number of stockholders or members. A certificate of the 
proceedings of the meeting must be signed by the chairman 
and the secretary of the meeting and a majority of the 
directors, and be filed in the office of the County Clerk 
where the original Articles of Incorporation were filed, and 
a certified copy must be filed in the office of the Secretary 
of State, and thereupon the term of the corporation is ex- 
tended for the specified period. 

Section 884.— AMENDMENT OF ARTICLES OF IN- 
CORPORATION.— If a corporation is formed, and it 
should be discovered that some important and material 
provision respecting the purposes of the corporation was 
omitted from the Articles of Incorporation, or that the 
Articles as filed did not contain all the statements of fact 
required by the law, amended Articles may be filed con- 
taining the omitted matters. In order to amend the Articles 
of Incorporation, however, the amendment must be ordered 
by a majority vote of the Board of Directors and must be 
assented to by the stockholders representing two-thirds 
of the subscribed capital stock, such assent being given 
either by vote at a meeting or by writing. A copy of the 
Articles of Incorporation, as amended, must then be filed 
in the office where the original was filed. The law declares 
that the time of the existence of a corporation cannot be 
extended by ameridment of its Articles of Incorporation. 
Statutes of 1903, page 411. 

Section 885.— CHANGE OF NAME.— A corporation may 
change its name. If a corporation desires to change its 
name, a petition asking for the change of name may be 



452 busine:ss laws i^or busine:ss men. 

filed in the Superior Court of the county in which its 
Articles of Incorporation were originally filed, or in which 
its property is situated. A copy of the petition must be 
published for four weeks. The Court will then hear the 
petition, and any objections which any person may have 
to make against the change of name; and if satisfied that 
the application is made for a good reason, the Court may 
make an order changing the name of the corporation. 
Civil Code, Sections 1276, 1277, 1278. 

Section 886.— CHANGE OF PLACE OF BUSINESS. 

— A corporation may change its place of business from one 
place to another in the same county, or from one city or 
county to another city or county in the State. Before 
such change can be made, the consent, in writing, of the 
holders of two-thirds of the capital stock must be obtained 
and filed in the ofiice of the corporation ; then notice of the 
intended removal must be published, for three weeks, in 
a newspaper in the county; the Board of Directors must 
then meet and authorize the change ; and a copy of the 
resolution adopted by the Board, together with an affidavit 
of the publication of the notice (certified by the President 
and vSecretary, with the corporate seal affixed), must be 
filed in each office where the original Articles of Incor- 
poration were filed. After these requirements are complied 
with, a corporation may lawfully change its place of 
business. 

Statutes of 1903, page 254. 

Section 887.— REMOVAL FROM ONE LOCATION 
TO ANOTHER IN SAME CITY.— The law does not 
require any consent of stockholders, or notice, or publica- 
tion, where a corporation desires to remove its place of 
business from one location to another in the same city, 
town, or village. Such removal may be made by authority 
alone of a resolution of the Board of Directors. 



CORPORATIONS IN CALIFORNIA. 453 

Section 888.— CAPITAL STOCK.— The law provides 
that all corporations for profit in California must issue cer- 
tificates for stock when fully paid up, signed by the Presi- 
dent and Secretary, and may provide, in their By-Laws, 
for issuing certificates prior to the full payment, under such 
restrictions and for such purposes as their By-Laws may 
provide. The corporation must keep an account of its slock, 
by whom owned, and the amount of subscriptions unpaid. 
It may issue its stock and commence business before sub- 
scriptions are all paid up, and even before the stock is all 
subscribed for. The capital stock is the fund upon which 
the corporation does business, and is the sole basis of its 
credit. Therefore, no corporation can issue stock, except 
for money paid, labor done, or property actually received, 
and all fictitious increase of stock is declared by the law 
to be void. 

Constitution of California, Article 12, Section 11; 
Civil Code, Section 323. 

Section 889.— AMOUNT OF SUBSCRIBED CAPITAL 
TO BE PAID IN.— It is only in the case of particular 
corporations that the law requires a certain amount of the 
subscribed capital stock to be paid in when the corpo- 
ration is formed. As a general rule there is no requirement 
on the subject. The instances in which a certain per cent of 
the capital stock is required to be paid in will be stated in 
relation to particular corporations. 

Section 890.— STOCKHOLDERS AND MEMBERS.— 

Certain corporations are not required to have any capital 
stock, and a person associated with others in such a cor- 
poration is called a member. The holder of shares in a 
corporation having a capital stock is called a stockholder. 

Section 891.— SHARES OF STOCK.— Whenever the 
capital stock of a corporation is divided into shares, and 
certificates have been issued, such shares of stock are per- 
sonal property. 



454 busin:ess laws i^or busini^vSS me:n. 

Section 892.— SUBSCRIPTION FOR STOCK.— When 
a corporation is formed, and a person subscribes for a 
certain number of shares, by such subscription he becomes 
the owner of the stock; and it is not essential to create his 
rights as owner that the certificate should actually be issued 
to him. The other incorporators or promoters cannot, after 
a person has become a subscriber for stock, arbitrarily say, 
"We will not issue the stock to him," and thus avoid the 
binding force of the subscription ; nor can the subscriber 
himself say, where the parties have acted in good faith, 'T 
have changed my mind ; I will not take the stock." By the 
subscription merely, the subscriber becomes bound to ac- 
cept and pay for the shares he has subscribed for. And 
to guard against any imposition upon those who have sub- 
scribed for stock, the law provides that a subscription for 
capital stock cannot be rescinded or canceled, except for 
fraud or mistake, without the unanimous consent of all the 
stockholders. What mistakes, or what acts of fraud in the 
organization of a corporation, would entitle any party to 
demand that a subscription for stock be canceled, must 
depend upon the peculiar facts of each case. If a party 
were induced by false statements or intentional misrep- 
resentations, concerning material matters connected with 
the proposed corporation, to subscribe for its stock, this 
would be a fraud upon him for which he could demand 
that his subscription be canceled. But, whatever the rights 
of the subscriber might be in the courts, the corporation 
itself can never cancel a subscription for stock without first 
having the unanimous consent of all the stockholders. 
(Decided by the Supreme Court in the case of Pacific Fruit 
Company vs. Coon, which decision is printed in Volume 107 
of the California Reports, page 447.) 

Section 893.— TRANSFER OF SHARES OF STOCK.— 

— Shares of stock in a corporation are transferred by in- 
dorsement and the delivery of the certificate. The indorse- 
ment is made by the signature of the owner,, his agent, 



' CORPORATIONS IN CALIFORNIA. 455 

attorney, administrator, or executor. The transfer thus 
made, by indorsement and delivery, .and nothing more, is 
valid between tlie parties to it. But to make such a trans- 
fer good as to third parties, something more is required ; 
the transfer must be entered upon the books of the cor- 
poration, so as to show the names of the parties by whom 
and to wliom transferred, the number of the certificate, 
the number of shares, and the date of the transfer. 
Civil Code, Section 324. 

Section 894.— TRANSFER OF STOCK HELD BY 
NON-RESIDENT.— The officers of a corporation are not 
bound to enter on its books any transfer of its shares 
owned by the parties residing out of the State, and are not 
bound to issue a certificate to the transferee, unless the 
person claiming under the transfer, or the attorney or 
agent of the non-resident owner, makes an affidavit or pro- 
duces other satisfactory evidence that the non-resident 
owner was alive at the date of the transfer; and if this 
affidavit is not made or evidence of such fact produced, 
the corporation may require an indemnity bond, with two 
sureties, conditioned to protect the corporation against 
any liability to the estate of the owner of the shares, in 
case of his being in fact dead before the transfer; and if 
neither the affidavit or other evidence, or the indemnity 
bond, Ts furnished wdien required, the corporation and its 
officers will not be liable for refusing to enter the transfer 
on the books. 

Civil Code, Section 326. 

Section 895.— TRANSFER OF STOCK HELD BY 
MARRIED WOMAN. — Shares of stock in corporations 
held by or owned by a married woman may be transferred 
by her, or her agent or attorney, without the signature of 
her husband, by indorsement and delivery of the stock. 
Civil Code, Section 325. 



456 BUSINESS LAWS ]?0R BUSINESS MEN. 

Section 896.— VOID CERTIFICATES.— It is unlawful 
for any corporation in California to issue stock except for 
money paid, labor done, or property actually received. 
Stock cannot be lawfully issued without such considera- 
tion, and all certificates issued by any corporation in viola- 
tion of this provision of the law are void. 
Civil Code, Section 359. 

Section 897.— REMEDY AGAINST CORPORATION 
REFUSING TO REGISTER TRANSFER OF STOCK. 

— If the officers of a corporation refuse to register a trans- 
fer of stock on its books, the person to whom the stock 
has been transferred may lawfully treat such refusal as a 
conversion of the shares by the corporation. He may then 
sue the corporation and obtain a judgment for the value 
of the stock at the time of the refusal to register the trans- 
fer, with interest at seven per cent per annum from that 
time. 

Civil Code, Section 3336. 

Section 898.— CERTIFICATES OF STOCK ARE 

NOT NEGOTIABLE.— Certificates of stock in a corpo- 
ration are not negotiable, in a commercial sense. They are 
mere evidences of the holder's title to a given share in the 
property and franchises of the corporation of which he is 
a member. Consequently, if a corporation issues to an 
owner of shares of stock a certificate transferable on the 
books of the company by indorsement and surrender of 
the certificate, and he indorses the same and then loses it, 
and it comes into the hands of a bona fide purchaser for 
value, such purchaser acquires no right to the stock. 
(Decided by the Supreme Court in the case of Sherwood 
vs. Meadow Valley Mining Company, which decision is 
printed in Volume 50 of the California Reports, page 412.) 
In the case cited, the language of Parsons on Contracts 
is referred to, where he says : ''The result would seem to 
be that all corporation bonds and government stocks. 



CORPORATIONS IN CALII^ORNIA. 457 

which pass by dehvery, or indorsement with dehvery, are 
negotiable ; but that certificates of stock in a corporation 
are not." 

Section 899.— WHEN CORPORATION CANNOT 
CLAIM ITS OWN STOCK INVALID.— A corporation is 
prechided from setting up the claim that its own stock is 
invalid, or not issued according to law, where the rights 
of a bona fide purchaser are involved. So it has been held 
that, where a corporation issues capital stock, and repre- 
sents it as fully paid and causes it to be so listed on the 
stock and bond exchange, the law will deny it the right 
to claim that the stock is invalid, as against a bona fide 
purchaser, even if the stock was in fact issued without 
consideration. (Decided by the Supreme Court in the case 
of Smith vs. Marlin, which decision is printed in Volume 
135 of the California Reports, page 247.) 

Section 900.— REMEDY AGAINST CORPORATION 
FOR REFUSING TO RECOGNIZE STOCKHOLDER. 

— If the corporation refuses to recognize the lawful holder 
of stock as a stockholder, or refuses to deliver to him a 
new certificate, or to register him on its books, he has two 
remedies. He may sue in the Superior Court and compel 
the corporation to recognize him as a stockholder, by 
registering him upon its books and delivering to him a new 
certificate; or, he may sue the corporation for damages, 
on the ground that by its refusal it has been guilty of a 
conversion of his stock. These remedies are given not 
only to the real owner of the stock, but also to others, as 
the pledgee, the guardian, or the administrator. (Decided 
by the Supreme Court in the case of Herbert Kraft Com- 
pany Bank vs. Bank of Orland, which decision is printed 
in Volume 133 of the California Reports, page 64.) 

Section 901.— MORTGAGE OF SHARES OF STOCK. 

— The statute law declares what personal property may 



458 BUSINESS LAWS I^OR BUSINESS MEN. 

be mortgaged in California. Other personal property, 
however, may be mortgaged, and the mortgage will be 
good as between the parties to it. Shares of stock in a 
corporation are personal property. A mortgage of shares 
of stock may be made, which is valid and binding between 
the parties, and without delivery of possession of the cer- 
tificate of stock. Such a mortgage is void as to creditors 
and subsequent purchasers in good faith for a valuable 
consideration; but where no such persons are complaining, 
the mortgage is good between the parties to it. 

Section 902.— SEAL OF CORPORATION.— Every cor- 
poration must have a seal, but it need not be used upon 
every occasion. Corporations, like individuals, may appoint 
agents, and make most of the contracts which fall within 
their general powers, without the use of a seal. 

Section 903.— DEED WITHOUT CORPORATE 
SEAL. — In a suit involving the validity of the deed of a 
corporation, executed without the corporate seal by per- 
sons signing as Directors, one who claims under such deed 
must show affirmatively that the deed was authorized by 
a resolution of the Directors entered on the records of the 
corporation, or that it was ratified by such resolution. 
(Decided by the Supreme Court in the case of Barney vs. 
Pforr, which decision is printed in Volume 117 of the Cali- 
fornia Reports, page 56.) 

Section 904.— WHAT REAL ESTATE MAY BE 
HELD BY CORPORATION.— A corporation may hold 
indefinitely any real estate necessary to be used by it in 
the conduct of its legitimate business ; but the Constitu- 
tion of California provides that no corporation shall hold 
for a longer period than five years any real estate, except 
such as may be necessary for carrying on its business. 
Therefore, if a corporation acquires any real estate, in any 
manner, which is not necessary in carrying on its business. 



J 



CORl'ORATIONS IN CALIFORxXIA. 4513 

it must sell such real estate within five years after the title 
is vested in it ; and if it does not do so, the Attorney- 
General may bring a suit against the corporation, in the 
name of the people of the State, to compel it to sell the 
land. 

Constitution of California, Article 12, Section 9. 

Section 905.— CORPORATION MUST KEEP WITH- 
IN OBJECT OF ITS CREATION.— It is one of the car- 
dinal principles governing the conduct of a corporation 
that it must keep within the purposes and objects for 
which it was organized. If organized to carry on a par- 
ticular business, it cannot engage in another. So, if a 
corporation formed to do a banking business should engage 
in insurance, the latter business would be outside of its 
legitimate object, and its acts in that business would have 
no validity. So far has this principle been carried in 
California, our Supreme Court has said that a contract of 
a corporation, outside the object of its creation as defined 
by the law of its organization, and therefore beyond the 
powers conferred upon it by the Legislature, is not void- 
able onl}^ but wholly void and of no legal effect. The 
objection to such a contract is not merely that the corpo- 
ration ought not to have made it, but that it could not 
make it. > 

Section 906.— VOID CONTRACT CANNOT BE 
RATIFIED. — A contract which is absolutely void, because 
outside of the objects of the corporation, cannot be rati- 
fied. The contract cannot be ratified by either party to 
it, because it could not have been authorized by either. 
No performance on either side can give a void contract 
any validity, or be the foundation of any right of action 
upon it. (Decided by the Supreme Court in the case of 
Chemical National Bank vs. Havermal, which decision is 
printed in Volume 120 of the California Reports, page 53.) 



460 BUSINi:SS LAWS FOR BUSINESS MEN. 

Section 907.— WHEN CORPORATION BOUND BY 
ITS OWN INVALID ACT.— While an absolutely void 
contract cannot be ratified, yet corporations are often 
bound by their own invalid act, as where the Directors 
have done an act without their lawful power, but the 
corporation has retained the benefits and still enjoys 
the fruits of the transaction. In such a case, the corpora- 
tion is not permitted to deny the validity of its own act, 
although it was irregular or invalid. This rule is illus- 
trated by a decision of the Supreme Court, where a prom- 
issory note was irregularly executed by the President and 
Secretary of a corporation, and upon being sued on the 
note, the corporation, without returning or offering to 
return the money received from the lender, denied the 
validity of the note and attempted to repudiate it. The 
Supreme Court said : "Assurning that the contract was out- 
side its power, the law does not allow a corporation to 
retain the benefits which it has received from the contract 
and escape liability upon it. The invalidity of a contract 
is subject to the equitable exception that, although a cor- 
poration in making a contract acts in disagreement with its 
charter, where it is a simple question of capacity or author- 
ity to contract, arising either on a question of regularity 
of organization, or of power conferred by the charter, a 
party who has had the benefit of the agreement cannot 
be permitted, in an action founded upon it, to question its 
validity. It would be in the highest degree inequitable 
and unjust to permit the defendant to repudiate a contract 
the fruits of which he retains. The exception referred to 
is founded upon the fact that the contract, though invalid, 
has been executed in the interests of the corporation, and 
for its benefit and advantage. Where, therefore, it has 
received the fruits of such a contract, it cannot refuse pay- 
ment on the ground that it had no power to contract. It 
would be otherAvise if the contract had not been executed." 
(Decided by the Supreme Court in the case of Main vs. 



CORPORATIONS IN CALII^ORNIA. 461 

Casserly, which decision is printed in Volume 97 of the 
CaHfornia Reports, page 127.) 

Section 908.— NOTICE TO CORPORATION.— The 

President is the proper person to whom notice, which is 
to affect a corporation, is to be given. The corporation 
has no eyes, ears, or understanding, save through its 
agents. The President is considered the head of the cor- 
poration, and it is his dut}^ to report to the Directors 
information affecting the interests of the corporation. 
Therefore, notice of any matter, given to the President, 
is notice to the corporation. 

Section 909.— LEASE OF FRANCHISE.— Where a 
corporation secures a franchise, by municipal grant, to 
operate gas and electric works, and to supply the inhabit- 
ants of the city with the product, it cannot lawfully lease 
its works and privileges to another, and such a lease, when 
made, is against public policy and void. The reason for 
this is, a franchise is a personal privilege, and can never 
be assigned without the consent of the grantor. (Decided 
by the Supreme Court in the case of Visalia Gas and Electric 
Light Company vs. Sims, which decision is printed in Vol- 
ume 104 of the California Reports, page 326.) 

Section ' 910.— MORTGAGE OF CORPORATION 
PROPERTY. — The President has not the power by virtue 
of his office to mortgage the property of the corporation. 
Nor has the Secretary such power by virtue of his office. 
Nor have both together the power which neither has sep- 
arately, nor have the .stockholders such power. The pow- 
ers of a corporation must be exercised, and its property 
controlled, by its Board of Directors, the decision of a 
majority of the Directors, when lawfully assembled, being 
valid as a corporate act. A mortgage of the corporation 
property can only be made by authority of a resolution 
of the Board of Directors, adopted by a majority vote, at 



462 BUSINESS LAWS I^OR BUSINESS MEN. 

a meeting lawfully held, and the transaction recorded in 
its minutes. If there is no resolution of the Board of 
Directors authorizing it, a mortgage of the corporation's 
property, though executed by the proper officers, is illegal 
and invalid. 

Section 91 1.— ASSIGNMENT OF ACCOUNTS.— In 

the conveyance of real estate, and the encumbrance of cor- 
poration property by mortgage, corporations are held to 
much narrower rules than apply to the transaction of its 
ordinary business aftairs. It is not contemplated that the 
Board of Directors shall meet upon every occasion when 
a contract is to be made, or other act done, in the ordinary 
conduct of the business of the company. Therefore, the 
President or General Manager of a corporation has power 
to assign its book accounts for collection, where the 
assignment is in the ordinary course of its business, and 
known to and acquiesced in by the Directors, and such a 
transaction as the officers have been in the habit of doing; 
and such assignment under such circumstances will be valid 
without previous authorization by resolution of the Board. 
The President or General Manager may also have like 
authority to make assignments of notes held by the cor- 
poration, to its creditors, either in payment of or as secur- 
ity for the payment of a debt of the corporation, without 
express authority of the Board of Directors. (Decided by 
the Supreme Court in the case of Greig vs. Riordan, which 
decision is printed in Volume 99 of the California Reports, 
page 316.) 

Section 912.— LIABILITY OF PROMOTERS.— A pro- 
moter is one who brings about the incorporation and 
organization of a corporation ; who brings together the 
persons who become interested in the enterprise, aids in 
procuring subscriptions, and sets in motion the machinery 
which results in the formation of the corporation. A pro- 
moter occupies a position of confidence towards those 



CORPORATIONS IN CALIFORNIA. 463 

whom be induces to enter into the enterprise. And if a 
promoter obtains property for the corporation, and trans- 
fers the property to the corporation for a sum which he 
falsely represents to be the cost price, but which is really 
much more, he will be liable to the stockholders for the 
profit made by him through his deceit. And in all other 
matters a promoter must deal fairly and openly with his 
associates in the formation of a corporation. 

Section 913.— WHAT IS A CORPORATION DE 
FACTO. — It sometimes happens that, in the formation of a 
corporation, many of the acts required to be performed in 
order to make a complete organization may have been ir- 
regularly performed, or some of them may have been en- 
tirely omitted ; yet, if the company has proceeded, claiming 
in good faith to be a corporation under the laws of Cali- 
fornia, and is doing business as such corporation, a party 
with whom it transacts business, and who accepts the ben- 
efit of its acts, cannot deny the validity of its incorporation. 
For it is termed a corporation de facto, a company in fact 
doing the business in good faith for which it was designed, 
although not organized strictly in accordance with law. 

Section 914.— WHO MAY QUESTION THE VALID- 
ITY OF^A CORPORATION.— The question of the due 
incorporation of any company claiming in good faith to be 
a corporation under the laws of this State, and doing busi- 
ness as such corporation, or of its right to exercise corpo- 
rate powers, cannot be inquired into, collaterally, in any 
private suit to which such de facto corporation may be a 
party. The vState alone, through its Attorney-General, has 
power to bring a suit to test the right of such a corpora- 
tion to exercise corporate powers. 

Section 915.— DENIAL THAT A CORPORATION 
EXISTS. — It does rot follow, because the State alone can 



464 BUSINESS LAWS FOR BUSINESS MEN. 

question the validity of a corporation or its right to exer- 
cise corporate powers, when the company claims in good 
faith to be a corporation and is doing business as such, 
that an individual is never permitted to deny the corporate 
existence. For it is true that, whenever a corporation 
brings a ^uit in the courts of this State, it must allege that 
it is a corporation, and the defendant may deny the fact, 
and then the corporation must prove it. And if it should 
appear that a body of men had met and declared that they 
constituted themselves a corporation, but neither sub- 
scribed to the capital stock, nor adopted Articles of Incor- 
poration, nor appointed the officers, nor performed any act 
in the organization of the corporation required by law, 
nor transacted any business as a corporation — in such a 
case the court would declare, even in a suit between private 
parties, that there was no incorporation and no right to 
exercise corporate powers. 

Section 916.— STOCKHOLDER'S RIGHT TO IN- 
SPECT BOOKS AND RECORDS.— The stockholder is 
interested in all the affairs and the management of the 
corporation. He is, in one sense, a part owner of the assets, 
his part being represented by the number of shares owned 
by him. The law of California, recognizing the necessity 
for an inspection by the stockholder of the books and rec- 
ords, whenever he desires to do so, has provided that all 
corporations for profit must keep a record, among other 
things, of all their business transactions ; and that such 
records shall always be open to the inspection of any Di- 
rector, member, or stockholder. It is the legal right of the 
stockholder to inspect, and the duty of the officers to allow 
him to inspect, at all times, the books and records of the 
corporation. 

Constitution of California, Article 12, Section 14; 
Civil Code, Section 377. 



CORPORATIONS IN CALIFORNIA. 465 

Section 917.— MOTIVES OF STOCKHOLDER IN 
MAKING EXAMINATION OF BOOKS.— The motives 
of the stockholder in demanding the right to make an 
examination of the books of the corporation will make no 
difference. He may not really have any specific interest 
at stake, rendering his inspection necessary; there may be 
no beneficial purpose on his part for which the examina- 
tion is desired ; he may wish to enforce a mere naked right, 
or to gratify mere idle curiosity; his motives may in fact 
be improper, and he may be seeking to gain information 
of a secret nature with the object of furnishing it to a 
rival company or corporation, to the injury and damage 
of the corporation wliose books he examines ; but none of 
these facts, if they exist, will be a legal excuse for refusing 
to allow a shareholder, however small his interest, to ex- 
amine the books and records of the corporation. The 
shareholder is not required to show an}^ reason or occa- 
sion for making the examination, nor can he be met with 
the defense that his motives are improper. (Decided by 
the Supreme Court in the case of Johnson vs. Langdon, 
which decision is printed in Volume 135 of the California 
Reports, page 624.) 

Section 918.— LIABILITY OF STOCKHOLDER FOR 
FURNISHING INFORMATION TO RIVAL COR- 
PORATION. — When it becomes known to the officers of 
a corporation that a stockholder has made an examination 
of the books with an improper motive, and that he has 
furnished information thus obtained to a rival corporation 
or company, the corporation he has so injured and dam- 
aged is not left by the law without a remedy. The guilty 
stockholder cannot be enjoined from inspecting the books, 
nor can the books be lawfully closed to him. But, by thus 
obtaining and disclosing information, he becomes liable in 
damages to the corporation, and the corporation can 
recover a judgment against liim for all the damages which 
30 



466 BUSINESS LAWS I^OR BUSINESS MEN. 

are occasioned to it by his conduct. True, he may not be 
financially able to pay the amount recovered, and the 
judgment, when obtained, may be worthless ; but the law 
does not take these matters into account; and a suit for 
damages is the only remedy a corporation has against its 
own stockholder who examines its books with an improper 
motive and for the purpose of injuring it. 

Section 919.— REMEDY OF STOCKHOLDER WHEN 
INSPECTION OF BOOKS IS REFUSED.— If a stock- 
holder applies to the proper officer, generally the secre- 
tary, in charge of the books, and demands the right to 
make an examinatin, his remedy upon refusal is to apply 
to the Superior Court of the county for a writ of mandate. 
The shareholder has a right to be fully informed as to the 
conditions of the corporation, the manner in which its 
affairs are conducted, and how the capital to which he has 
contributed is employed and managed. And if an exami- 
nation of the books is refused him, upon showing this fact 
in a petition to the Superior Court, together with the fact 
that he is a stockholder, the law requires the Court to 
issue a writ commanding the officers of the corporation to 
open its books, records, and journals to his examination 
and inspection. 

Section 920.— LIABILITY OF STOCKHOLDER FOR 
CORPORATION DEBTS.— The law of California im- 
poses upon each stockholder the burden of paying the 
debts of the corporation. Each stockholder is individu- 
ally and personally liable for such proportion of the debts 
of the corporation as the amount of stock owned by him 
bears to the whole of the subscribed capital stock. That 
is, if a person owns shares of stock to the amount of 
$10,000, and the subscribed capital stock is $100,000. he 
will be individually and personally liable for the one-tenth 
part of the debts of the corporation. It will make no 



CORPORATIONS IN CALIFORNIA. 467 

difference in his liability whether the subscriptions have 
been paid in or not; for his proportion is measured, not b}^ 
the capital actually paid in, but by the capital stock sub- 
scribed. If debts or claims are owing by or presented to 
a corporation, the stockholder is liable only for his propor- 
tion of such debts or claims. It will make no difference, 
either, whether the corporation is a domestic or foreign 
corporation; the liability of their stockholders in California 
is the same. 

Civil Code, Section 322. 

Section 92i.~LIABILITY OF MEMBER WHERE 
THERE IS NO CAPITAL STOCK.— In corporations 
having no capital stock, each member is individually and 
personally liable for his proportion of its debts and liabil- 
ities. His liability is to be measured by a comparison of 
the amount of the debt with the number of members ; and, 
therefore, if the corporation owes $10,000, and there are 
ten members, each will be liable for the one-tenth part of 
the debt, or $1,000. 

Civil Code, Section 322. 

Section 922.— PLEDGEE OR TRUSTEE NOT LIA- 
BLE FOR DEBTS.— A person who holds stock as col- 
lateral security does not become, by reason of the pledge, 
liable for the debts of the corporation ; but the pledgor 
remains liable, as before the pledge. A person holding 
stock merely as a trustee does not become, in such repre^ 
sentative capacity, liable for the debts of the corporation ; 
but the person he represents as trustee is deemed the 
stockholder, as respects such liability. 
Civil Code, Section 322. 

Section 923.— WHEN LIABILITY OF STOCK- 
HOLDER BEGINS.— The liability of a stockholder for 
the debts of the corporation begins when he acquires his 



468 busine:ss laws for business men. 

stock. He is not liable for the debts of the corporation 
incurred before he acquired his stock. For instance, to 
make a stockholder liable to pay his proportion of the 
amount due on a note made by the corporation, it must 
appear that the debt for which the note was given was 
incurred since he became a stockholder. For if a corpo- 
ration buys goods, before the stockholder acquires his 
stock, and afterwards makes its note for the amount, 
that stockholder is not liable on the note, because it was 
made for a debt incurred prior to the time when he became 
a stockholder. The stockholder's liability begins with the 
creation of the original debt, and the debt must be incurred 
while he is a stockholder, and not before ; for otherwise, 
he is not liable at all. (Decided by the Supreme Court in 
the case of Winona Wagon Company vs. Bull, which deci- 
sion is printed in Volume io8 of the California Reports, 
page I.) 

Section 924.— WHEN LIABILITY NOT RELEASED 
BY SUBSEQUENT TRANSFER.— The question some- 
times arises whether, when a corporation becomes insolv- 
ent, and unable to pay its debts as they become due in the 
ordinary course of business, a stockholder can transfer his 
shares to another and thus be rid of liability for the debts 
of the concern. The Supreme Court, in the case of Welch 
vs. Sargent, said on this point : ''Generally speaking, the 
law places no restriction upon the right of a stockholder 
of a corporation to transfer his stock, so long as the 
corporation is solvent. But after the corporation has 
become insolvent, and the stockholder knows this, a 
shareholder cannot transfer his stock to irresponsible 
parties so as to relieve himself from liability to the credit- 
ors." It matters not what his intention was, for he may 
have transferred the stock in good faith, yet the law will 
still protect the creditors of an insolvent corporation by 
holding such a transfer void as to them. (Decided by the 



CORPORATIONS IN CALIFORNIA. 469 

Supreme Court in the case of Welch vs. Sargent, which 
decision is printed in Volume 127 of the California Reports, 
page 72.) 

Section 925.— STOCKHOLDER MAY SUE OTHER 
STOCKHOLDERS.— A stockholder may sue other stock- 
holders in the same corporation for their pro rata of a debt 
due him by the corporation. (Decided by the Supreme 
Court in the case of Brown vs. Merrill, which decision is 
printed in Volume 107 of the California Reports, page 446.) 

Section 926.— ASSIGNEE OF CREDITOR MAY SUE 
STOCKHOLDERS.— -The creditor of a corporation may 
assign his account for collection, and the assignee will have 
the right to sue the stockholders in his own name. It is 
no defense, in a suit against stockholders, that the assignee, 
instead of the original creditor, brings the suit to collect 
the amount of the debt. 

Section 927 —CREDITOR'S RIGHT TO UNPAID 
SUBSCRIPTIONS.— Debts due to a corporation consti- 
tute a portion of its assets, and may be reached by creditors. 
Among these are unpaid subscriptions to stock. As to 
creditors, the corporation is presumed to have sought credit 
based on its supposed capital, actually paid in or due from 
its stockholders. As the supposed capital is the sole basis 
of credit, the stockholders, who are the real parties carrying 
on the business, must make the representation as to its 
capital good ; and a corporation cannot release the obli- 
gations of stockholders to pay up its unpaid subscriptions, 
and thus evade the payment of creditors. And the creditors 
may bring a suit to collect the unpaid balance due on stock 
of a corporation which has become insolvent. 

Section 928.— V/ITHIN Vs/^HAT TIME SUIT 
AGAINST STOCKHOLDER MAY BE COM- 
MENCED. — A suit against a stockholder by a creditor of 



470 BUSINESS LAWS FOR BUSINESS MEN. 

a corporation must be commenced within three years after 
the cause of action accrues. If a corporation owes a debt, 
and the creditor wishes to sue a stockholder for his pro- 
portion of the amount due, he must sue within three years 
after the debt was created, or the HabiHty of the stock- 
hohler will be barred. And in this connection it has been 
decided that the liability of the stockholder cannot be 
renewed or extended by any renewal or extension of the 
indebtedness which the creditor may make with the cor- 
poration. (Decided by the Supreme Court in the case of 
Flyman vs. Coleman, which decision is printed in Vol- 
ume 82 of the California Reports, page 650.) The liability 
of the stockholder is created and exists by statute. The 
liability arises when a debt is contracted by the corpo- 
ration. The liability is limited to three years from the 
time it arises, and the corporation has no power to extend 
that limitation without direct authority from the stock- 
holders. Therefore, if a debt is owing to a corporation, and 
the corporation afterwards takes a note from the debtor, 
the liability of the stockholder does not begin when the 
note is given, but dates back to the time when the debt 
was created. (Decided by tlie Supreme Court in the case 
of Hunt vs. Ward, which decision is printed in Volume 
99 of the California Reports, page 612.) 

Code of Civil Procedure, Section 359. 

Section 929.— WHEN LIABILITY OF STOCK- 
HOLDER IS SATISFIED.— Each stockholder has a 
several liability, and that liability is proportionate to the 
amount of his stock; and when he has paid his portion of 
any debt, or of all the debts of the corporation, he is freed 
from all liability on that account. 

Section 930.— LIABILITY OF STOCKHOLDERS IN 
DISTILLERY FOR FEDERAL TAXES.— Every stock- 
holder in a corporation possessing a still, distillery, or dis- 
tilling apparatus, is individually and personally liable to 



CORPORATIONS IN CALIl'ORNIA. 471 

the United States for the taxes imposed on the Hquors 
distilled. His individual property, although in no way 
connected with the business of such corporation, may be 
seized and distrained for Federal taxes due on spirits pro- 
duced by it. (Decided by the Supreme Court in the case 
of Richtcr vs. Blasingame, which decision is printed in 
Volume no of the California Reports, page 530,) 

Section 931.— HOLDING PROPERTY IN OTHER 
COUNTIES. — A corporation acquiring or holding property 
in a county other than its principal place of business must 
file in the office of the County Clerk of such county a certi- 
fied copy of its Articles of Incorporation. The copy must 
be certified by the Secretary of State. 
Civil Code, Section 299. 

Section 932.— V/ITHIN WHAT TIME CORPORA- 
TION MUST COMMENCE BUSINESS.— A corporation 
must organize, by the election of a Board of Directors, and 
must commence business, within one year from the date of 
its certificate of incorporation. If it does not do so, or, if 
organized for the construction of any particular works, it 
fails to commence the construction of its works within 
one year, any creditor may complain to the Attorney- 
General, who will begin a suit in the name of the State and 
have the Court declare the corporate existence forfeited 
and at an end. 

Statutes of 1901, page 632. 

Section 933.— FAILURE TO ELECT OFFICERS— If 

a corporation does organize within one year, but neglects 
and fails, for two years thereafter, to elect a President,. 
Secretary, Cashier, or any necessary officers, and to trans- 
act in regular order the business for which it was incor- 
porated, its corporate powers cease and it will be dissolved. 
Statutes of 1901, page 632. 



472 BUSINESS LAWS FOR BUSINESS MEN. 

Section 934.— INCREASE OF CAPITAL STOCK.— A 

corporation may increase its capital stock, at any time, and 
the law provides what must be done wdien an increase of 
stock is desired. To increase the capital stock, a meeting 
of the stockholders must be called for that purpose by a 
resolution of the Directors. A notice must be published in 
a newspaper, once a week, for at least sixty days, stating 
that the object of the meeting is to vote on the question of 
increasing the capital stock ; the amount to which it is pro- 
posed to increase the capital ; and the time and place of 
holding the meeting. The meeting must be held at the 
principal place of business of the corporation and in the 
building where the Directors usually meet. In addition to 
the notice by publication, the Secretary must also address 
a copy of the notice to each of the stockholders whose 
names appear on the company's books, at his place of 
residence, if known ; and if the residence of the stockholder 
is not known, the notice must be addressed to him at the 
place where the company has its principal place of busi- 
ness ; and the notice must be mailed to each stockholder 
at least thirty days before the day appointed for the meet- 
ing. When the meeting takes place, two-thirds of the 
subscribed or issued stock must be voted in favor of the 
proposition to increase the capital stock, in order to carry it. 
Statutes of 1903, page 347. 

Section 935.— DECREASE OF CAPITAL STOCK.— 

The capital stock of a corporation may be decreased in 
either one of two ways. It may be decreased by a vote of 
the stockholders, at a meeting for the purpose, held in the 
same manner and after similar notice as a meeting for 
increase of stock. The notice must state the amount of 
the decrease proposed, and the proposed decrease must be 
carried by a vote representing at least two-thirds of the 
subscribed or issued capital stock. The law provides a sec- 
ond" mode of decreasing the capital stock. A corporation 
may diminish its capital stock by the unanimous vote of 



CORPORATIONS IN CALIFORNIA. 473 

its Board of Directors, at a regular meeting, or at a special 
meeting called for that purpose, and approved by the writ- 
ten assent of stockholders holding two-thirds of the sub- 
scribed or issued capital stock. The written assent of the 
stockholders must be filed with the Secretary. The Secre- 
tary, as soon as the resolution of the Directors is passed 
providing for the decrease, must send a copy of the reso- 
lution to each stockholder whose name appears on the com- 
pany's books ; he must send by mail, postage prepaid, 
addressed to the known place of residence of the stock- 
holder, or to the principal place of business of the corpora- 
tion, if the residence of the stockholder is not known ; and 
the copy of the resolution must be mailed to each stock- 
holder at least thirt}^ days before the certificate mentioned 
in the following section is made and filed. Within the 
thirty days any stockholder may file with the Secretary 
his dissent in writing. The capital stock cannot be de- 
creased to an amount less than the indebtedness of the 
corporation. 

Statutes of 1903, page 348. 

Section 936.— CERTIFICATE OF INCREASE OR 
DECREASE OF CAPITAL STOCK.— If capital stock is 
increased or decreased by a vote of the stockholders, a 
certificate, signed and verified by the President and Sec- 
retary and a majority of the Directors, and with the cor- 
porate seal attached, must be filed in the office of the 
County Clerk, and a certified copy must be filed in the 
office of the Secretary of State. The certificate must show 
that all the requirements of the law have been complied 
with ; also, the amount to which the capital stock has been 
increased or diminished; the amount of stock represented 
at the meeting, and the total vote in the affirmative, and 
the total vote in the negative ; and the total number of 
subscribed or issued shares of capital stock of the corpo- 
ration. If the stock is decreased by a vote of the Directors, 
a similar certificate must be filed, which must show, also. 



474 BUSINESS LAWS FOR BUSINI^SS ME:n. 

the total amount of stock represented by the written assents 
and the written dissents filed with the Secretary. 
Statutes of 1903, 349. 

Section 937.--PAPER IN WHICH NOTICES MUST 
BE PUBLISHED.— When the By-Laws of a corporation 
prescribe the paper in which notices of meetings of Direc- 
tors or stockholders are to be published, such notices must 
be published in that paper. If the By-Laws do not pre- 
scribe any particular paper, the Directors may select the 
paper in which notices may be published. 

Section gaS.—ASSESSMENT OF STOCK.— The Di- 
rectors of any corporation in California, after one-fourth 
of its capital stock has been subscribed, may, for the pur- 
pose of paying expenses, conducting business, or paying 
debts, levy and collect assessments upon the subscribed 
capital stock. 

Civil Code. Section 331. 

Section 939.— AMOUNT OF ASSESSMENT.— The law 
provides generally that no one assessment must exceed ten 
per cent of the capital stock named in the Articles of Incor- 
poration. To this general provision there are three excep- 
tions, viz.: (i) If the whole capital of a corporation has 
not been paid up, and the corporation is unable to meet 
its liabilities or to satisfy the claims of its creditors, the 
assessment may be for the full amount unpaid upon the 
capital stock; or if a less amount is sufficient, then it may 
be for such a percentage as will raise that amount; (2) 
The Directors of railroad corporations may assess the cap- 
ital stock in installments of not more than ten per cent per 
month, unless their Articles of Incorporation provide other- 
wise ; and (3) the Directors of fire or marine insurance cor- 
porations may assess such a percentage of the capitai stock- 
as they deem proper. 

Civil Code, Section 332. 



CORPOILVTIONS IN CALIFORNIA. 475 

Section 940.— ORDER LEVYING ASSESSMENT.— 

The assessment must be levied by an order of the Board 
of Directors. Every order levying an assessment must 
specify the amount thereof, to whom, and where payable ; 
fix a day, subsequent to the full term of publication of the 
assessment notice, on which the unpaid assessments shall 
be delinquent, not less than thirty nor more than sixty days 
from the time of making the order levying the assessment; 
and a day for the sale of delinquent stock, not less than 
fifteen nor more than sixty days from the day the stock 
is declared delinquent. 

Civil Code, Section 334. 

Section 941.— NOTICE OF ASSESSMENT.— A notice 
of the assessment must be published by the Secretary, once 
a week for four successive weeks, in a newspaper published 
at the principal place of business, if there be one, or, if 
there is none, then the notice must be published in some 
other newspaper in the county. If the principal place of 
business is in one county, and the v/orks of the company 
in another, the notice must be published in both counties 
for the same length of time. Also, the notice must either 
be personally served upon each stockholder, or sent through 
the mail addressed to him. If the stockholder's address 
is known, the notice must be mailed there; but if the 
address is not known, it is sufficient to mail the notice to 
him at "the principal place of business of the corporation. 
Civil Code, Section 336. 

Section 942.— FORM OF NOTICE OF ASSESSMENT. 

— The notice of assessment, mentioned in the preceding 
section, must be substantially in the following form: — 

NOTICE OF ASSESSMENT. 

WILLITS STATE BANK.— Location of principal place 
of business, Willits, Mendocino County, State of Califor- 
nia. Notice is hereby given, that at a meeting of the Di- 
rectors, held on the day of ;, 190. ., 



476 BUSINESS LAWS I^OR BUSINESS MEN. 

an assessment of per share was 

levied upon the capital stock of the corporation, payable 
on the day of , 190. ., to the Secre- 
tary of said AVillits State Bank, at his office in said bank in 
Willits, Mendocino County, State of California. Any stock 
upon which this assessment shall remain unpaid on the 

day of , 150. ., will be delinquent and 

advertised for sale at public auction, and, unless payment 

is made before, will be sold on the day of 

, 190.., to pay the delinquent assessment, 

together with costs of advertising and expenses of sale. 



Secretary and Cashier. 
Office at AVillits State Bank, Main Street, 

Willits, California. 



Section 943.— HOW ASSESSMENT MAY BE EN- 
FORCED. — The law provides two methods for the enforce- 
ment of the liabilities of stockholders to the corporation, 
by reason of assessments levied upon the capital stock — 
one by a sale of the stock, for the delinquent assessment; 
the other by a suit against the stockholder to recover from 
him the amount of the assessment. The Board of Directors 
has the option to adopt one or the other method of enforcing 
the payment of an assessment on stock lawfully levied. 
Civil Code, Section 349. 

Section 944.— NOTICE OF SALE.— If any portion of 
the assessment remains unpaid, on the day named in the 
notice for declaring the stock delinquent, the Secretary 
must, if the Directors elect to have the stock sold, publish 
a notice of sale in the same paper in which the delinquent 
notice was published. The notice, when published in a 
daily paper, must be published for ten days, excluding Sun- 
days and holidays, previous to the day of sale. When pub- 
lished in a weekly paper, it must be published in each 
issue for two weeks previous to the day of sale. The first 
publication of all delinquent sales must be at least fifteen 
days prior to the day of sale. The notice must specify 



CORT^-ORATIONS IN CALIFORNIA. 477 

every certificate of stock, the number of shares it repre- 
sents, and the amount due thereon, except where certifi- 
cates may not have been issued to parties entitled thereto, 
in which case the number of shares and amount due thereon, 
together with the fact that the certificates for such shares 
have not been issued, must be stated. 
Civil Code, Sections 338, 339. 

Section 945.— FORM OF NOTICE OF SALE.— The 
following is a form of the notice of sale mentioned in the 
preceding Section : — 

NOTICE OF SALE OF STOCK FOR DELINOUENT 
ASSESSMENT. 

WILLITS STATE BANK.— Location of principal place 
of business, Willits, Mendocino County, State of Califor- 
nia. Notice is hereby given, that there is delinquent upon 
the following described stock, on account of assessment 

levied on the day of , 190. . , the 

several amounts set opposite the names of the respective 
shareholders, as follows: (Here insert names, number of 
certificate, number of shares, and amount.) And in accord- 
ance w^ith law, and an order of the Board of Directors made 

on the day of , 190. ., so many shares 

of each parcel of such stock as may be necessary will be 
sold, at public auction, at the ofiice of the Secretary of 
said corporation, at the Willits State Bank, Main Street, 
Willits, Mendocino County, State of California, on the 

.^. day of , 190. ., at 10 o'clock A. M. 

of that day, to pay delinquent assessments thereon, together 
with costs of advertising and expenses of the sale. 



Secretary. 
Office at Willits State Bank, Main Street, Willits, Mendo- 
cino County, State of California. 

Section 946.— WHO ARE LIABLE ON ASSESS- 
MENTS. — F'or the purpose of ascertaining those who are 
liable to it for the amount of an assessment, a corporation 
can look only to the list of stockholders as their names are 
reeistered upon its books. Where an assignment of stock 



478 BUSINESS LAWS FOR BUSINESS MEN. 

is made after the levy of an assessment, but no formal 
transfer is made on the books of the company, the assignor 
is still liable on the assessment. Where stock has been 
assigned, and a transfer of the stock has been duly made on 
the books of the company, the assignee becomes liable on 
assessments. 

Section 947.— EXTENSION OF TIME FOR PAY- 
MENT AND SALE.— The dates fixed in any notice of 
assessment or notice of delinquent sale may be extended 
from time to time for not more than thirty days, by order 
of the Directors, entered on the records of the corporation; 
but no order extending the time for the performance of 
any act specified in any notice is effectual unless notice 
of such extension or postponement is appended to and 
published with the notice to which the order relates. 
Civil Code, Section 345. 

Section 948.— SALE OF STOCK FOR ASSESSMENT. 

— By the publication of the notice, the corporation acquires 
jurisdiction to sell and convey a perfect title to all of the 
stock described in the notice of sale upon which any por- 
tion of the assessment or cost of advertising remains 
unpaid at the hour appointed for the sale, but must sell 
no more of such stock than is necessary to pay the assess- 
ments due and costs of sale. On the day, at the place, and 
at the time appointed in the notice of sale, the Secretary 
must, unless otherwise ordered by the Directors, sell or 
cause to be sold at public auction, to the highest bidder 
for cash, so many shares of each parcel of the described 
stock as may be necessary to pay the assessments and 
charges thereon, according to the terms of sale ; if pay- 
ment is made before the time fixed for sale, the party paying 
is only required to pay the actual cost of advertising, in 
addition to the assessments. The person offering at such 
sale to pay the assessment and costs for the smallest num- 
ber of shares or fraction of a share is the highest bidder, 



CORPORATIONS IN CALIFORNIA. 479 

and the stock purchased must be transferred to him on the 
stock books of the corporation, on payment of the assess- 
ment and costs. 

Civil Code, Sections 340, 341, 342. 

Section 949.— PURCHASE OF DELINQUENT STOCK 
BY THE CORPORATION.— If, at the sale of stock, no 
bidder offers the amount of the assessments and charges 
due, the same may be bid in and purchased by the corpo- 
ration, through the Secretary, President, or any Director, at 
the amount of the assessments, costs, and charges due; 
and the amount of the assessments, costs, and charges 
must be credited as paid in full on the books of the cor- 
poration, and entry of the transfer of the stock of the 
corporation must be made on the books. While the stock 
remains the property of the corporation, it is not assessable, 
nor must any dividends be declared thereon ; but all assess- 
ments and dividends must be apportioned upon the stock 
held by the stockholders of the corporation. All purchases 
of its own stock made by any corporation vest the legal 
title to the stock in the corporation ; and the stock so 
purchased is held subject to the control of the stockholders, 
who may make such disposition of the same as they deem 
fit, in accordance with the By-Laws of the corporation or 
the vote of a majority of all the remaining shares. When- 
ever any portion of the capital stock of a corporation is 
held by the corporation by purchase, a majority of the 
remaining shares is a majority of the stock, for all purposes 
of election, -or voting on any question at a stockholders' 
meeting. 

Civil Code> Sections 343, 344. 

Section 950.— SUIT TO RECOVER AMOUNT OF 

ASSESSMENT.— On the day specified for declaring the 
stock delinquent, or at any subsequent time before the sale 
of the delinquent stock, the Board of Directors may order 
all such proceedings stopped, and may elect to sue the 



480 BUSINESS LAWS FOR BUSINESS MEN. 

delinquent stockholders for their assessments. The stock- 
holder is liable in the suit for the amount of the assessment, 
and for the costs and expenses incurred by the corporation 
in trying to collect it. 

Civil Code, Section 349. 

Section 951.— LIEN FOR ASSESSMENT.— After an 
assessment has been made, a corporation has a lien for the 
payment of the assessment, which is not affected by the issu- 
ance of a new certificate and a transfer of the shares. The 
lien is upon the shares, and not upon the certificate. When 
an old certificate is surrendered, and a new certificate is 
issued, the new certificate represents the same shares ; but 
the shares themselves remain subject to any lien the corpo- 
ration may have upon them, and the new owner takes sub- 
ject to such lien. The identity of the stock is not affected 
by the transfer. The keeping of a stock book, in which 
the original issue and all subsequent transfers must be 
entered, enables the holder or purchaser to trace his shares 
back to the original issue by the numbers of tlie different 
certificates, and thus identify the shares upon which any 
assessment has been made, and enables him to ascertain 
with certainty, in connection with the other records of the 
corporation relating to assessments and delinquent sales, 
whether his shares are free from liens or liability in favor 
of the corporation; and in the same manner enables the 
corporation to enforce its delinquent assessment upon the 
shares liable therefor, no matter how many transfers have 
been made subsequent to the assessment; each transferee 
taking the legal title, but subject to the assessment, just 
as the grantee of the legal title to land takes it subject to 
all valid recorded liens. (Decided by the Supreme Court 
in the case of Craig vs. Hesperia Land and Water Company, 
which decision is printed in Volume 113 of the California 
Reports, page 7.) 



CORPORATIONS IN CALIFORNIA. 481 

Section 952.— BY-LAWS OF CORPORATION.— Every 

corporation formed under the laws of California must, 
within one month after filing Articles of Incorporation, 
adopt By-Laws for the government of the corporation. 
The By-Laws adopted must not be inconsistent with the 
Constitution and laws of the State. 



Section 953— HOW BY-LAWS ADOPTED.— Tlie 

assent of stockholders, representing a majority of all the 
subscribed capital stock, or a majorit}^ of the members, 
if there be no capital stock, is necessary to adopt By-Laws, 
if they are adopted at a meeting called for that purpose. 
By-Laws may also be adopted, without a meeting for that 
purpose, by the written assent of the holders of two-thirds 
of the stock, or by the written assent of two-thirds of the 
members, if there is no capital stock. If a meeting of 
stockholders is called for the purpose of adopting By-Laws, 
notice must be given by publication in a newspaper for 
two weeks, by order of the acting President. 
Civil Code, Section 301. 

Section 954.— WHAT BY-LAWS MAY PROVIDE 

FOR. — A corporation may, by its By-Laws, provide for the 
following things : (i) The time, place, and manner of calling 
and condncting its meetings, and may dispense with notice 
of all regular meetings of the stockholders or Directors ; 
(2) The number of stockholders or members constituting 
a quorum; (3) The mode of voting by proxy; (4) The 
cjualifications and duties of Directors, the time of their 
annual election, and the mode and manner of giving notice 
of such election; (5) The compensation and duties of 
officers ; (6) The manner of election and the term of office 
of all officers other than the Directors ; (7) Suitable pen- 
alties may be provided for the violation of the By-Laws, 
not exceeding $100 for any one offense; (8) The amount 
of stock to be owned by a Director; (9) For the filling 



482 BUSINESS LAWS FOR BUSINESS MEN. 

of vacancies on the Board of Directors; (lo) For the issu- 
ing of certificates of stock before full payment therefor; 
(ii) For the disposal of stock owned by the corporation; 
and, (12) The By-Laws may specify the newspaper in 
which all notices of the meetings of stockholders or Di- 
rectors, when notice is necessary, shall be published. 
Civil Code, Sections 301, 305, 308, 323 344. 

Section 955.— BOOK OF BY-LAWS.— The law provides 
that all By-Laws adopted must be certified by a majority 
of the Directors and Secretary of the corporation, and copied 
in a legible hand, in a book kept in the ofiice of the cor- 
poration, to be known as the "Book of By-Laws," and no 
By-Law shall take effect until so copied, and the book shall 
then be opened to the inspection of the public during ofiice 
hours of each day except holidays. 
Civil Code, Section 304. 

Section 956.— AMENDMENT OF BY-LAWS.— The 
By-Laws can be amended by a vote of the stockholders 
at the annual meeting, or at a special meeting called for 
that purpose. The By-Laws may also be amended, with- 
out a meeting, by the written assent of the holders of two- 
thirds of the stock, or two-thirds of the members if there 
is no capital stock. 

Civil Code, Section 304. 

Section 957.— REPEALING OLD AND ADOPTING 

NEW BY-LAWS.— Old By-Laws may be repealed abso- 
lutely, and new By-Laws adopted in their place, in the 
same manner as amendments are made, stated in Sec- 
tion 956. 

Section 958.— RECORD OF AMENDMENTS.— The 
law provides that, "whenever any amendment or new By- 
Law is adopted, it shall be copied in the Book of By-Laws 
with the original By-Laws, and immediately after them. 



CORPORATIONS IN CALIFORNIA. 483 

and shall not take effect until so copied. If any By-Law 
be repealed, the fact of repeal, with the date of the meet- 
ing at which the repeal was enacted, or written assent was 
filed, shall be stated in said book, and until so stated the 
repeal shall not take eft'ect." 

Civil Code, Section 304. 

Section 959.— THE BOARD OF DIRECTORS.— The 

corporate powers, business, and property of corporations 
must be exercised, conducted, and controlled by a Board of 
Directors. 

Section 960.— NUMBER OF DIRECTORS —The law 

is, that the number of Directors cannot be less than five, 
but may be any number more than five. There is an excep- 
tion, which is, that "corporations formed for the purpose 
of erecting and managing halls and buildings for the meet- 
ing and accommodation of several lodges or societies of 
any benevolent or charitable order or organization, and 
in connection therewith the leasing of stores and offices 
in such building or buildings for other purposes, the cor- 
porate powers, business, and property thereof may be con- 
ducted, exercised, and controlled by a Board of not less 
than five or more than fifty Directors, to be chosen from 
among the stockholders of such corporation or from among 
the members of such order or organization." Prior to 1901 
the number of Directors of a business corporation was 
limited in California to seven, but the Legislature threw 
off that restriction, and now a business corporation may 
have an unlimited number of Directors. 
Statutes of * 1 90 1, page 308. 

Section 961.— QUALIFICATION OF DIRECTORS. 

— A majority of the Directors must be citizens of Califor- 
nia. Directors of corporations for profit must be holders 
of its stock to an amount fixed by the By-Laws of the 



484 BUSINESS LAWS I^OR BUSINESS MEN. 

corporadon; Directors of all other corporations must be 
members thereof. 

Statutes of 1901, page 308. 

Section 962.— DIRECTORS FOR THE FIRST YEAR. 

— The Directors to serve for the first year, or until the 
time fixed for the election of Directors, are designated in 
the Articles of Incorporation ; and the persons named in 
the Articles of Incorporation, upon the organization of a 
corporation, will serve until their successors are regularly 
elected. 

Section 963.— ELECTION OF DIRECTORS.— The 

Directors of a corporation must be elected annually by 
the stockholders or members, and if no provision is made 
in the By-Laws for the time of election, the election must 
be held on the first Tuesday in June. There must be a 
majority of the subscribed capital stock, or of the members 
where there is no capital stock, represented at the meeting 
for the election of Directors, either in person or by proxy 
in writing. The election must be by ballot, and every 
stockholder has the right to vote in person or by proxy 
the number of shares standing in his name, for as many 
persons as there are Directors to be elected, or he may 
cumulate his shares and give one candidate as many votes 
as the number of Directors multiplied by the number of his 
shares of stock shall equal ; or the stockholder may dis- 
tribute his shares on the same principle among as many 
candidates as he shall think fit. These provisions of the 
law apply to all corporations doing buisness in this State, 
domestic or foreign. The Director receiving the highest 
number of votes shall be declared elected. In corporations 
having no capital stock, each member of the corporation 
may cast as many votes for one Director as there are 



CORPORATONS IN CALIFORNIA. 485 

Directors to be elected, or he may distribute them among 
any or all the candidates. 

Civil Code, Sections 302, 312; Statutes of 1903, 
page 253. 

Section 964.— WHO MAY VOTE AT ELECTION OF 
DIRECTORS. — To entitle a person to vote at the election 
of Directors, he must be a bona fide stockholder, having 
stock in his own name on the stock books of the corpora- 
tion at least ten days before the election. It is made a 
requisite of the right to vote that the voter shall not only 
be registered as a stockholder, but that he shall have been 
so registered for at least ten days prior to the election, and 
that he shall also be a bona fide stockholder at the time 
of the election. The voter must be either the owner of 
the stock, or have some other interest in it, in order to 
be a bona fide stockholder. Therefore, one in whose name 
stock has been registered upon the books of the corpora- 
tion, but who has never had any interest in the stock, and 
is only a dummy for the real owner, and when the change 
on the books was made for the purpose of enabling the 
real owner to avoid his liabilities, is not a bona fide stock- 
holder, within the meaning of the law, and should not be 
allowed to vote at an election of Directors. (Decided by 
the Supreme Court in the case of Smith vs. S. F. and N. P. 
Railway^Company, which decision is printed in Volume 115 
of the California Reports, page 584.) 
Civil Code, vSections 307, 312. 

Section 965.— WHO MAY VOTE PLEDGED STOCK. 

— One may be, in several supposed cases, a bona fide stock- 
holder without being the owner of the stock. When the 
owner of stock pledges it as security for a debt, the creditor 
in whose hands it is placed has the right to have the stock 
transferred to his own name upon the books of the cor- 
poration, and if he does so ten days before the election, 
or other occasion when a vote is to be taken upon any 



486 BUSINESS LAWS FOR BUSINESS MEN. 

question, he, and not the real owner, will have the right 
to vote the stock. True, he is not the owner, but by his 
pledge he has acquired such an interest in the stock and 
its proceeds as makes him a bona fide stockholder, withia 
the meaning of the law. If, after the stock is pledged, 
it is allow^ed to remain upon the books of the corporation 
in the name of the real owner, he, and not the pledgee, 
will have the right to vote the stock. (Decided by the 
Supreme Court in the case of Smith vs. S. F. and N. P. 
Railway Company, which decision is printed in Volume 115 
of the California Reports, page 584.) 

Section 966.— WHO MAY VOTE STOCK IN HANDS 

OF TRUSTEE.— Where stock is held by a Trustee, he is 
entitled to vote the stock, if it has been transferred to his 
name on the books of the corporation ten days before the 
election. 

Section 967.— WHO MAY VOTE STOCK IN HANDS 
OF ADMINISTRATOR OR EXECUTOR.— AVhen the 
owner or pledgee is dead, he must be succeeded by his 
personal representative, that is, by his executor or adminis- 
trator. In such case, the administrator or executor will 
have the right to have the stock transferred on the books 
of the corporation to him, and will be entitled to vote the 
stock. In the case of a Trustee who dies, the law will 
not allow^ the trust to die with him, but will proceed to 
appoint another Trustee to succeed him. . and m this case 
the succeeding Trustee will be entitled to have the stock 
transferred to him, and may vote it. 

Section 968.— WHO MAY VOTE STOCK BELONG- 
ING TO MINOR. — The guardian of a minor, the owner 
of stock in a corporation, is entitled to vote it. 

Section 969.— WHO MAY VOTE STOCK BELONG- 
ING TO INSANE PERSON.— The guardian of the estate 



CORPORATIONS IN CALII^ORNIA. 487 

of an insane person, the owner of stock in a corporation, 
is entitled to vote it 

Section 970.— VOTING BY PROXY.— A stockholder 
may be represented at all elections by proxy. He may 
select any one he pleases as his proxy, to vote his stock, 
and the person selected by him need not himself be a stock- 
holder. The corporation can regulate the mode of voting 
by proxy, that is, make such requirements as that the proxy 
must produce authority in writing, properly witnessed, and 
filed, or other similar regulations ; but a corporation has 
no power to restrict the right of voting by proxy to cer- 
tain persons, or to control their selection by the stockholder 
in any way, or to curtail in any other respect the right 
to vote by proxy. There was for a long time in California 
a custom among banking corporations to have a By-Law 
providing that no person not a stockholder would be 
allowed to vote as a proxy, but the Supreme Court has 
declared such a By-Law invalid, upon the ground that a 
corporation has no power to make or enforce it. The law 
places no restriction whatever upon the stockholder as to 
the person he shall be at liberty to select to act under his 
proxy; and a corporation has no power to either qualify 
or limit the right to vote by proxy, (Decided by the Su- 
preme Court in the case of People's Home Savings Bank 
vs, Superior Court, which decision is printed in Volume 
104 of the California Reports, page 649.) 
Civil Code, Section 312. 

Section 971.— ORGANIZATION OF BOARD OF DI- 
RECTORS.— Immediately after their election, the Direct- 
ors must organize by the election of a President, a Secre- 
tary, and a Treasurer. 

Civil Code, Section 308. 



488 BUSINESS LAWS FOR BUSINESS MEN, 



Section 972.— DUTIES OF PRESIDENT, SECRE- 
TARY, AND TREASURER.— The duties of the Presi- 
dent, the Secretary, and the Treasurer may be prescribed 
by the corporation in its By-Laws. They may be required 
to perform any duty consistent with the objects of the cor- 
poration and not inconsistent with the laws of the State. 

Section 973.— OTHER OFFICERS.— A corporation 
may appoint other officers than those named by the law, 
and prescribe what their duties shall be. Such officers may 
be provided for in the By-Laws, and appointed by the 
Board of Directors. 

Section 974.— QUORUM OF DIRECTORS.— A major- 
ity of the Board of Directors constitutes a quorum for the 
transaction of business. Unless a quorum is present and 
acting, no business performed, or act done, is valid, as 
against the corporation. No legal quorum of a Board of 
Directors is present when action is attempted to be taken 
on a matter as to which one of the Directors necessary to 
make the quorum is interested ; and resolutions passed at 
such a meeting cannot be ratified by the stockholders. 
Civil Code, Section 305. 

Section 975.— DIRECTOR CANNOT VOTE ON MAT- 
TER IN WHICH HE IS INTERESTED.— A Director 
of a corporation cannot legally vote or act upon any matter 
in which he is financially interested. By virtue of his posi- 
tion, he is disqualified from voting, or in any mode acting 
in his official capacity as a Director, for the purpose of 
creating an obligation in his own favor. So strictly is this 
principle adhered to by the courts, that no question is 
allowed to be raised as to the fairness or unfairness of 
the contract so entered into. A Director must not partici- 
pate in any act in which his personal interest is antagonistic 



CORPORATIONS IN CALIFORNIA. 489 

to that of the corporation. Being interested in the subject- 
matter, the law does not allow him, as a Director, to deal 
with himself, and thus be subjected to the temptation to 
advance his own interests. The Supreme Court of Cali- 
fornia had under consideration a case where a Director 
named Wells formed a part of a quorum, at a meeting of 
the Board, which voted the execution of a mortgage on 
the property of the corporation to him ; and the Court 
held that the mortgage was invalid, saying: ''The same 
rules which preclude an interested Director from uniting 
with other Directors in the creation of an obligation in 
favor of himself by his vote forbid him from uniting with 
them in creating such obligation by any act or exercise 
of his official position ; and a meeting at which there is 
not a majority of the Directors, exclusive of such interested 
Director, is not a competent Board for the transaction of 
any corporate business. By reason of the disqualification 
of Wells from taking any part in passing the resolution 
for executing the note and mortgage to himself, he could 
neither vote in favor of the resolution, nor by his presence 
help to create a quorum by which the other two Directors 
could adopt it. For the purpose of any action upon this 
resolution, he was as much a stranger to the Board as if 
he had never been elected a Director; and, although he 
may have been physically present in the room with the 
other two Directors, he was not for that purpose a compe- 
tent part of the Board, any more than would have been any 
other bystander, and there was not, therefore, a quorum 
of the Board 'present and acting' at the time the resolution 
was adopted." (Decided by the Supreme Court in the case 
of Curtin vs. Salmon River Hydraulic Gold Mining Com- 
pany, which decision is printed in Volume 130 of the Calir 
fornia Reports, page 345.) 

Section 976.— REGULAR AND SPECIAL MEET- 
INGS. — The time of holding the meetings of the Board 



490 BUSINESS LAWS FOR BUSINESS MEN. 

of Directors may be fixed in the By-Laws, and the By- 
Laws may provide that no notice be given of regular 
meetings. Where a special meeting is called, for any pur- 
pose, all of the Directors must be notified by the Secretary 
in the proper manner. If the meeting is special, and the 
Directors are not all notified, the meeting is not duly as- 
sembled, and its action does not bind the corporation as a 
valid corporate act. 

Section 977.— PUBLICITY CANNOT MAKE ILLE- 
GAL ACT OF DIRECTORS VALID.— The publicity 
alone of an illegal and unauthorized act of the Directors 
of a corporation does not make it valid; and Directors 
charged with doing an illegal act cannot defend it by saying 
that their act was open, and not secret. 

Section 978.— VACANCY IN BOARD OF DIRECT- 
ORS. — The By-Laws of a corporation may provide the 
manner in which a vacancy in the Board of Directors shall 
be filled. If the By-Laws make no provision for filling a 
vacancy, the Board of Directors must appoint a member 
to fill the vacancy. 

Civil Code, Section 305. 

Section 979.— CAN A CORPORATION PERFORM 
CORPORATE ACTS, SUCH AS THE MORTGAGING 
OF ITS REAL PROPERTY, WHILE THERE IS A 
VACANCY IN ITS BOARD OF DIRECTORS?— This 

question was a new one in the United States prior to the 
year 1899. In that year the Supreme Court of California 
made a decision in a case where this question was directly 
raised, (where there was a vacancy in a Board of five, and 
the remaining four members, without filling the vacancy, 
undertook to authorize a mortgage of the corporation's real 
estate,) holding that a vacancy in the Board does not pre- 
vent it from acting so as to bind the corporation, if there 
is a majority of a full Board remaining. Chief Justice 



CORPORATIONS IN CALIl-ORX I.\. 491 

Beatty, giving the decision of the Court, said on this sub- 
ject : "The By-Laws of this corporation, and, I suppose, its 
Articles of Incorporation, provided for a Board of five 
Directors, and the question is whether during a vacancy 
in one of these directorships the four remaining Directors 
could lawfully assemble for the transaction of any business 
except the filling of such vacancy. Counsel have not cited 
any case decided in this State or any other in the United 
States in which this question has been directly decided. 
It is no doubt true tliat Directors owe to their constituents 
the duty of keeping the Board full, b}^ promptly filling 
vacancies as they occur; and this for the reason that share- 
holders are entitled to the benefit of the experience and 
advice of all the members of a full Board in the trans- 
action of all its business. When the Directors violate this 
duty, there may be sound reasons for holding that they 
should not be allowed to take any advantage, as against 
the shareholders, of acts or resolutions passed when a full 
Board was not in existence. But Avhen the corporation is 
dealing with a stranger, who. acting in good faith and in 
ignorance of the existence of a vacancy in the Board of 
Directors, parts with his property on the faith of what he 
is induced to believe is a valid corporate obligation, the 
case is cei:tainly very different in its substantial merits. 
The votes of a majority of a full Board may authorize a 
corporate act, although there may be a vacancy in the 
Board." (Decided by the Supreme Court in the case of 
Porter vs. Lassen County Land and Cattle Company, which 
decision is printed in Volume 127 of the California Reports, 
page 661.) 

Section 980.— SERVICES OF DIRECTOR OUTSIDE 
OF HIS DUTIES AS SUCH.— Where a Director of a cor- 
poration performs services as its manager, or in any other 
legitimate way, not pertaining to his duties as Director, 
he is entitled to recover from the corporation the reasonable 
value of such services, though no rate of compensation was 



492 BUSINieSS LAWS FOR BUSINESS MEN. 

fixed by the Board of Directors prior to performance of the 
services. (Decided by the Supreme Court in the case of 
Bassett vs. Fairchild, which decision is printed in Volume 
132 of the CaHfornia Reports, page 631.) 

Section 981.— LIABILITY OF DIRECTORS FOR 
MONEY EMBEZZLED.— The Directors of a corporation 
are individually and personally liable to its creditors for 
money embezzled by any of the officers of the corporation. 
This the Constitution of the State declares. But they are 
liable only to all th.e creditors, and one creditor cannot sue 
alone to recover his debt by reason of failure to pay when 
the funds of a corporation have been embezzled. All the 
creditors must be joined in such a suit, and the money 
recovered to the corporation from the Directors will con- 
stitute a trust fund to be paid to all the creditors. 

Section 982.— ADVANCES OF MONEY BY DI- 

DECTOR. — Where money is advanced to a corporation 
by a Director, when the corporation is in debt and unable 
to obtain money from other sources, and such money is 
received and made use of in the business of the corpora- 
tion, it will be liable to him for the repayment of the sum 
advanced. 

Section 983,— DIRECTORS IN TWO CORPORA- 
TIONS. — The fact that two corporations have the same 
Directors, or that some of the Directors in one are also 
Directors in the other, does not prevent the two corpora- 
tions from dealing with each other. Where two corpora- 
tions, through their Boards of Directors, make a contract 
with each other, the Directors who are common to both 
are not within the rule which prohibits one who acts in 
a fiduciary capacity from dealing with himself. Two cor- 
porations have the right, within the scope of their chartered 
powers, to deal with each other; and this right is not 
destroyed by the fact that some, or even a majority, of the 



CORPORATIONS IN CALIFORNIA. 493 

Directors are common to both. Of course, if such Directors 
should wrongfully use their powers to the prejudice of one 
of the corporations, their action could be set aside for 
fraud. But common Directors owe the same fidelity to 
both corporations, and there is no presumption that they 
will deal unfairly with either; and therefore their acts as 
such common Directors are not void. 

Section 984.— AUTHORITY OF PRESIDENT.— The 

President of a corporation may have more extensive powers 
conferred upon him than a strict interpretation of the law 
would show^ The Directors of a business corporation have 
power, by resolution, to give the President general authority 
to incur debts, negotiate loans, enter into contracts, and 
otherwise act as the agent of the corporation ; and where 
a resolution of this kind is passed at a meeting of the 
Directors, unless it is in direct conflict with the By-Laws, 
the President will have authority to do all such acts on 
behalf of the corporation as are mentioned in the resolution. 
(Decided by the Supreme Court in the case of McCormick 
vs. Stockton and Tuolumne County R. R. Company, which 
decision is printed in Volume 130 of the California Reports, 
page 100.) 

Section 985.— PRESIDENT MAY EMPLOY ATTOR- 
NEY. — The President of a corporation has power to employ 
an attorney, when the exigencies of his company require it. 
He need not obtain the consent of the Directors or stock- 
holders to do this. By virtue of his position as official head 
of the corporation he has the power to do so. 

Section 986.— DIVIDENDS.— The Directors of a cor- 
poration cannot make dividends, except from the surplus 
profits arising from the business. The Directors cannot 
withdraw, divide, or pay to the stockholders, or any of 
them, any part of the capital stock, while the corporation 
is a going concern. 

Civil Code, Section 309. 



494 ' BUSINESS LAWS I^OR BUSINESS MEN. 

Section 987.— EXTENT OF DEBTS TO BE CRE- 
ATED. — The Directors of a corporation have no power 
to create debts beyond the amount of the subscribed capital 
stock. If they create debts beyond the capital stock, the 
Directors are individually, jointly, and severally liable to 
the corporation and the creditors for such debts. A Di- 
rector, how^ever, who is not present at the meeting when 
the debt is created, or who has his dissent to the Board's 
action entered on the minutes, will not be liable. 
Civil Code, Section 309. 

Section 988.— RECORDS OF CORPORATION.— All 

corporations for profit in California are required by the 
law to keep a record of all their business transactions; a 
journal of all meetings of their Directors, members, or 
stockholders, with the time and place of holding the same, 
whether regular or special, and if special, its object, how 
authorized, and the notice thereof given. The record must 
embrace every act done or ordered to be done ; w^ho were 
present, and who absent; and, if requested by any Director, 
member, or stockholder, the time shall be noted when he 
entered the meeting or obtained leave of absence therefrom. 
On a similar request, the ayes and noes must be taken on 
any proposition, and a record thereof made. On similar 
request, the protest of any Director, member, or stock- 
holder, to any action or proposed action, must be entered 
in full. All such records must be open to the inspection 
of any Director, member, stockholder, or creditor of the 
corporation. Corporations for profit must also keep a book, 
to be known as the ''Stock and Transfer Book," in which 
must be kept a record of all stock; the names of the stock- 
holders, or members, alphabetically arranged; installments 
paid or unpaid ; assessments levied and paid or unpaid ; 
a statement of every alienation, sale, or transfer of stock 
made, the date thereof, and by and to whom; and all such 
other records as the By-Laws prescribe. Such "Stock and 



CORPORATIONS IN CALIFORNIA. 495 

Transfer Book" must be kept open to the inspection of any 
stockholder, member, or creditor. 

Civil Code, Sections 377, 378. 

Section 989.— REMOVAL OF DIRECTORS FROM 
OFFICE. — No Director can be removed from office, unless 
by a vote of two-thirds of the members, or of stockholders 
holding two-thirds of the capital stock, at a general meeting 
held after previous notice of the time and place, and of the 
intention to propose such removal. Meetings of stock- 
holders for this purpose may be called by the President 
or by a majority of the Directors, or by members or stock- 
holders holding at least one-half of the votes. Such calls 
must be in writing, and addressed to the Secretary, who 
must thereupon give notice of the time, place, and object 
of the meeting, and by wdiose order it is called. If the 
Secretary refuse to- give the notice, or if there is no Sec- 
retary, the call may be addressed directly to the members or 
stockholders, and be served as a notice, in which case it 
must specify the time and place of meeting. 

Section 990.— EXAMINATION OF CORPORATIONS. 

— As the right of corporations to exist and do business 
comes fr^om the State, it follows logically that the State 
retains the power to examine into the affairs of all cor- 
porations at any time. The law provides that the Governor 
may require the Attorney-General, or the District Attor- 
ney of any county, to make an examination into the affairs 
of a corporation and report to the Governor. The Legis- 
lature may also examine into the condition and affairs of a 
corporation, by a committee appointed by either the Senate 
or Assembly. And the Legislature may dissolve all cor- 
porations by repealing the laws under which they were 
created. 

Civil Code, Sections 382, 383, 384. 



496 busine:ss laws i^or busine:ss men. 

Section 991.— DISSOLUTION OF CORPORATION.— 

The dissolution of a corporation may be voluntary, or 
involuntary. It is voluntary, when the dissolution is 
effected by consent of the stockholders or members. It 
is involuntary, when the dissolution is compelled against 
or without the consent of the stockholders or members. 
If voluntary, an application is made to the Superior Court 
of the county where the principal place of business of the 
corporation is. This application to the Court must first 
be authorized by a resolution of the members or stock- 
holders, adopted by a tw^o-thirds vote ; and it must also 
appear that all claims and demands against the corporation 
have been paid and discharged. A corporation may also 
be dissolved against the consent of the stockholders by a 
judgment of dissolution in a suit brought by the Attorney- 
General. In such a suit, if it appears that the corporation 
is doing a business not provided for by its charter, or has 
ceased to do business at all, or its term of existence has 
expired, or is in such a condition that it can no longer hope 
to carry out the ends and purposes of the corporation, the 
corporation will be declared dissolved by judgment of the 
Court. 

Code of Civil Procedure, Sections 1227, 1228, 803. 

Section 992.— DISPOSITION TO BE MADE OF 
PROPERTY UPON DISSOLUTION.— Upon the disso- 
lution of a corporation, the capital stock, and all property 
belonging to the corporation^ will be divided among the 
stockholders in proportion to the number of shares held by 
each. But before any such division can be made, it must 
appear that all debts of the corporation have been paid. 
The Directors of a dissolved corporation have authority to 
go on and make final settlement of its affairs, and have 
power to make a division of the property left over after 
the payment of the debts. 

Civil Code, Section 309. 



CORPORATIONS IX CALIFORNIA. 497 

Section 993.--FALSE REPORTS.— Any officer of a cor- 
poration who wilfully gives a certificate, or wilfully makes 
an official report, public notice, or entry in any of the 
records or books of the corporation, concerning the cor- 
poration or its business, which is false in any material 
representation, is liable for all the damages resulting there- 
from to any person injured thereby; and if two or more 
officers unite or participate in the commission of any of 
such acts, they are jointly and severally liable. 
Civil Code. Section 316. 

Section 994.— TRANSFER OF FRANCHISE.— No sale, 
lease, assignment, transfer, or conveyance of the business, 
franchise, and property, as a whole, of any corporation is 
valid without the consent of stockholders holding of rec- 
ord at least two-thirds of the issued capital stock of the 
corporation ; such consent to be either expressed in writing, 
executed and acknowledged by such stockholders, and 
attached to such sale, lease, assignment, transfer, or con- 
veyance, or by a vote at a stockholders' meeting called for 
that purpose ; but with such assent so expressed, such sale, 
lease, assignment, transfer, or conveyance is valid. 
Statutes of 1903, page 396. 

Section 995.— TRANSFER OF FOREIGN CONGES- 
SIONS. — A corporation owning grants, concessions, fran- 
chises, and property, in a foreign country, has the right 
under our laws to sell and convey the same ; but such sale 
and conveyance can only be made by a resolution adopted 
by the vote of a majority of the Board of Directors, and 
the written consent of the holders of two-thirds of the 
capital stock. 

Statutes of 1899, P'^S^ 95- 

Section 996.— GENERAL POV/ERS OF CORPORA- 
TION. — The law provides what shall be the general powers 
32 



498 busine:ss laws i^or busine:ss m^n. 

of a corporation in California. Every corporation in Cali- 
fornia has power, (i) To sue and be sued in any court; 
(2) To make and use a common seal, and alter the same 
at pleasure; (3) To purchase, hold, and convey such real 
and personal estate as the purpose of the corporation may 
require ; (4) To appoint such subordinate officers or agents 
as the business of the corporation may require, and to allow 
them suitable compensation; (5) To make By-Laws, not 
inconsistent with any existing law, for the management of 
its property, the regulation of its affairs, and for the transfer 
of its stock; (6) To admit stockholders or members, and 
to sell their stock or shares for the payment of assessments 
or installments ; (7) To enter into any obligations or con- 
tracts essential to the transaction of its ordinary affairs, 
or for the purpose of the corporation. The manner of the 
exercise of these general powers has already been stated in 
preceding sections. 

Civil Code, Section 354. 

Section 997.— TAXATION OF CORPORATIONS.— 

Shares of stock in corporations possess no intrinsic value 
over and above the actual value of the property of the cor- 
poration which they stand for and represent ; and the assess- 
ment and taxation of such shares, and also all the corporate 
property, would be double taxation. Therefore, all prop- 
erty belonging to corporations (except the property of 
national banking associations not assessable by Federal 
statute) can be assessed and taxed. But no assessment can 
be made of shares of stock in any corporation (except in 
national banking associations, whose property, other than 
real estate, is exempt from assessment by Federal statute). 
Statutes of 1899, P^&^ 9^- 

Section 998.— LAWS APPLYING TO PARTICULAR 
CORPORATIONS. — There are certain laws which apply 
to particular corporations, and which qualify in important 
provisions the general laws stated in preceding Sections 



CORPORATIONS IN CALIFORNIA. 499 

of this book. In following Sections will be found a state- 
ment of laws applying to particular corporations. It must 
not be understood, however, that the general laws do not 
apply to the corporations named; for all the general laws 
do apply to all corporations, but qualified and limited by 
the application of laws applying to particular corporations. 

Section 999.— BANKING CORPORATIONS.— Some of 

the laws applying specially to banking corporations, are as 
follows : — 

(a) — Amount of Capital Stock. — Every banking corpora- 
tion in California, organized after March 5th, 1903, must 
have the following stock : In a city or toAvn of 5,000 inhabit- 
ants or under, not less than $25,000; in a city or town of 
over 5,000 inhabitants and not over 10,000, $50,000; in a 
city or town of over 10,000 inhabitants and not over 25,000, 
$100,000; in a city or town of over 25,000 inhabitants, 
$200,000. 

Statutes of 1903, page 87. 

(b) — When Capital Must Be Paid In.— Fifty per cent 
of the capital stock must be paid in at the start ; and before 
the Secretary of State issues to any corporation that pro- 
poses to do a banking business his certificate of the filing 
of the Articles of Incorporation, there must be filed in his 
office the affidavit of the persons named in the articles as 
the first Directors of the corporation that all the capital 
stock has been actually and in good faith subscribed, and at 
least fifty per centum thereof paid, in lawful money of the 
United States, to a person in such affidavit named, for the 
benefit of the corporation. The remainder of the capital 
stock must be paid in within two years after a banking 
corporation receives its certificate of incorporation. 
Statutes of 1903, page 87. 

(c) — Reserve Fund. — Every banking corporation must, 
before declaring a dividend, carry at least one-tenth part 
of the net profits for the preceding half year to a surplus 
or reserve fund, until such reserve fund shall amount to 



500 BUSINESS LAWS FOR BUSINESS MEN. 

twenty-five per cent of the paid-up capital stock. But the 
whole or any, part of such surplus or reserve fund, if held 
as the exclusive property of stockholders, may at any time 
be converted into paid-up capital stock, in which event such 
surplus or reserve fund must be restored in the manner 
above stated until it amounts to twenty-five per cent of 
the aggregate paid-up capital stock. The law does not 
limit the amount of the reserve fund to exactly twenty-five 
per cent; it must not be less, but it may be more, at the 
option of the corporation. 

Statutes of 1903, page 353. 

(d) — Advertising by Bank. — A bank is not compelled to 
advertise at all, but if it does, the law makes certain restric- 
tions which must be obeyed. No banking corporation is 
allowed to publish ip an advertisement any statement of 
the capital stock authorized or subscribed, unless it includes 
in the advertisement a statement showing the amount of 
capital actually paid up. A failure to obey this law by 
any officer of a bank makes him guilty of a misdemeanor. 
Statutes of 1903, page 353. 

(e) — Restrictions on Savings Banks. — No savings bank 
can lend to exceed sixty per cent of the market value of 
any piece of real estate to be taken as security, except for 
the purpose of facilitating the sale of property owned by 
the corporation. And it is unlawful for any savings and 
loan society, or savings bank, to purchase, invest, or loan 
its capital, or the money of its depositors, or any part of 
either, in mining shares or stocks. Any president or man- 
aging officer who knowingly consents to a violation of the 
above provision is guilty of a felony. 
Statutes of 1903, page 352. 

(f) — List of Stockholders. — Every corporation doing a 
banking business in California must keep in its office, in 
a place accessible to its stockholders, depositors, and credit- 
ors, and for their use, a book containing a list of all the 
stockholders in such corporation, and the number of shares 
held by each ; and every banking corporation must keep 



CORPOIL\TIONS IN CALIFORNIA. 501 

posted in its office in a conspicuous place, accessible to the 
public generally, a notice, signed by the President or Sec- 
retary, showing: First, The names of the Directors of such 
corporation ; Second, The number and value of shares of 
stock held by each Director. The entries in this book, 
and the notice, must be made and posted within twenty- 
four hours after any transfer of stock, and are conclusive 
evidence against each Director and stockholder of the 
number of shares of stock held by each. 
Civil Code, Section 321. 

(g) — Lien of Bank. — A bank has a general lien, depend- 
ent on possession, upon all property in its hands belonging 
to a customer, for the balance due the bank from such 
customer in the course of their business together. 
Civil Code, Section 3053. 

(h) — Bank Check Is Not Assignment of Funds. — A bank 
check is a bill of exchange. The delivery of a check does 
not operate as an assignment of the funds drawn upon, 
and where the funds are garnished as those of the drawer 
before the check is presented for payment, the garnishment 
will hold. An ordinary uncertified check upon a general 
bank account is neither a legal nor an equitable assignment 
of any part of the sum standing to the credit of the de- 
positor, and confers no right upon the payee which he can 
enforce against the bank. A check is simply an order 
which may be countermanded and payment forbidden by 
the drawer at any time before it is actually cashed. There- 
fore, an attaching creditor of the depositor will hold the 
funds by serving a garnishment upon the bank before a 
check given another for the money deposited has been 
presented and accepted at the bank. (Decided by the Su- 
preme Court in the case of Donohoe-Kelly Banking Com- 
pany vs. Southern Pacific Company, which decision is 
printed in Volume 25, No. 1350, California Decisions, 
page 60.) 

(i) — Liability of Bank for Payment of Check after Death 
of Drawer. — The delivery of a check with instructions not 



502 BUSINESS LAWS FOR BUSINl^SS ME^N. 

to present it for payment until after the death of the drawer 
does not operate as an assignment of the funds drawn upon, 
and is not vaHd as a gift; and where the bank pays the 
check after the drawer's death, an action will lie against 
the bank to recover the money for the estate of the decedent. 
(Decided by the Supreme Court in the case of Pullen vs. 
Placer County Bank, which decision is printed in Volume 
25, No. 1349, California Decisions, page 51.) 

(j) — National Bank Cannot Deal in Stocks. — A national 
bank has no power to deal in stocks of another corporation; 
and it cannot purchase or subscribe for the stock of another 
corporation. As incidental to the power to loan money 
on personal security, however, a national bank may, in 
the usual course of doing such business, accept stock of 
another corporation as collateral ; and by the enforcement 
of its rights as pledgee it may become the owner of the 
collateral ; but it cannot, in the ordinary course of business, 
buy or sell stocks of another corporation. (Decided by 
the Supreme Court in the case of Chemical National Bank 
vs. Havermale, which decision is printed in Volume 120 
of the California Reports, page 53.) 

Section 1000.--INSURANCE CORPORATIONS.— The 

siibject of insurance as a contract has been presented under 
the head of "Fire Insurance." Yet there are some restric- 
tions in the law which deserve separate notice. 

(a) — Capital Stock. — The capital stock of a corporation 
transacting fire, marine, inland navigation, or life insurance, 
in California, cannot be less than $200,000. Foreign insur- 
ance corporations doing business in this State must have 
at least $200,000 paid-up capital, or a paid-up capital equal 
to at least $200,000 cash assets, over and above all liabilities. 
Civil Code, Section 419. 

(b) — When Capital Must Be Paid Up. — The entire capital 
stock of every fire or marine insurance corporation must 
be paid up in cash within twelve months from the filing of 



CORPOrL\TIONS IN CALIFORNIA. 503 

the Articles of Incorporation, and no policy of insurance 
must be issued or risk taken until twenty-five per cent of 
the whole capital stock is paid up. 

Civil Code, Section 424. 
(c) — Amount Which Can Be Taken on One Risk. — Fire 
and marine insurance corporations can never take, on any 
one risk, whether it is a marine insurance or an insurance 
against fire, a sum exceeding one-tenth part of the capital 
actually paid in, and intact at the time of taking such risk, 
without reinsuring the excess above one-tenth. 

Civil Code, Section 428. 

Section looi.— RAILROAD CORPORATIONS.— There 

has been much particular legislation on the rights and 
liabilities of railroad corporations, but it is proposed to 
notice here only a few matters, which are of general interest 
and importance. 

(a) — Articles of Incorporation. — In addition to the mat- 
ters stated in the Articles of Incorporation of other cor- 
porations, when a railroad company is incorporated, the 
Articles of Incorporation must state: (i) The kind of road 
to be constructed ; (2) The place from and to which it is 
intended to be run, and all the intermediate branches ; 
(3) The estimated length of the road; and, (4) That at 
least ten per cent of the capital stock subscribed has been 
paid in ta the Treasurer. 

Civil Code, Section 291. 

(b) — Subscription to Stock of Railroad. — Where a person 
signs an agreement that he will take so much stock in a 
railroad corporation, naming the amount; and afterwards 
the Articles of Incorporation are prepared and filed, in 
which it is stated th'e same person has subscribed another 
and smaller sum ; the railroad company cannot afterwards 
claim any greater amount than is stated in the Articles of 
Incorporation. It is imperatively required by law that 
the Articles of Incorporation of a railroad shall state the 
amount of the capital stock actually subscribed and by 



504 BUSINESS LAWS I^OR BUSINESS MEN. 

whom, and no other statement as to the amount of his 
subscription will be binding on the subscriber, even though 
in writing and signed by him. (Decided by the Supreme 
Court in the case of Monterey and Salinas Valley R. R. 
Company vs. Hildreth, which decision is printed in Volume 
53 of the California Reports, page 123.) 

(c) — When Construction Must Be Begun. — The law 
provides that every railroad corporation must, within two 
years after filing its original Articles of Incorporation, begin 
the construction of its road, and mvist every year thereafter 
complete and put in full operation at least five miles of its 
road, until the same is fully completed ; and upon its failure 
so to do, for the period of one year, its right to extend its 
road beyond the point then completed is forfeited. 
Civil Code, Section 468. 

(d) — Rates of Fare on Street Railroads. — The rates of 
fare on the cars of street railroads in California cannot 
exceed ten cents for one fare for any distance under three 
miles, and in municipal corporations of the first class the 
fare cannot exceed, five cents per trip of any distance in 
one direction. 

Statutes of 1903, page 172. 

(e) — Condemnation of Land for Right of Way. — A rail- 
road corporation has the power to condemn land for its 
right of way, and may lay out its road not exceeding nine 
rods wide. The owner must be paid the value of his land 
taken, besides all damages which the construction of the 
road causes to his adjoining lands. Prior to November 
1902, railroad companies were allowed to take possession 
of the land required before damages were paid, by deposit- 
ing a sum of money in court as security for the payment 
of such damages as might be awarded. But this can no 
longer be done, at any rate not until the Supreme Court 
reverses itself again. The Supreme Court, on November 
8th, 1902, decided that the law allowing a railroad corpo- 
ration to take possession of land for right of way, pending 
a suit to condemn it, was unconstitutional. So, while that 



CORPORATIONS IN CALIP^ORNIA. 505 

decision stands, the owner of the land must be actually 
paid the damages awarded him before the railroad company 
can take possession, or do any construction work on the 
land. (Decided by the Supreme Court in the case of Stein- 
hart vs. Superior Court, which decision is printed in Volume 
24, No. 1334, California Decisions, page 534.) 



PART VIII 



MINES AND MINING 

Section 1002.— UNITED STATES LAWS.— The laws 
of the United States govern the subject of mines and min- 
ing, and provide the manner in which locations shall be 
made, how a mining claim can be held, and the particular 
lands upon which a mining location may be placed. The 
laws of the United States also direct and control the rights 
and liabilities of miners in relation to each other. The 
laws of the United States are paramount on all these 
matters. 

Section 1003.— STATE LAWS.— While, as has been said, 
the laws of the United States are paramount, yet the State 
of California has power, through its Legislature, to pass 
mining laws, providing for the health and safety of those 
engaged in mining, or employed in and about mining works ; 
and to pass mining laws regulating locations, and other 
matters, provided such laws are not in conflict with the 
laws of the United States. 

Section 1004.— LOCAL RULES AND CUSTOMS.— The 
miners of any mining district in the State may adopt local 
rules and establish local customs in relation to the acqui- 
sition, holding, and working of claims within such district ; 
and such rules and customs, when proved, have the force 
of law, provided they do not conflict with the laws of the 
United States or of the State of California. These local 
rules and customs usually deal with the posting and record- 
ing of location notices, and sometimes regulate the size 
of a claim, and the number of claims which any person 
(506) 



MINES AND MINING. 507 

may locate, in the district; and while they cannot extend 
or enlarge the rights conferred by the laws of the United 
States or of the State, they can and frequently do restrict 
them. 

Section 1005.— WHO MAY LOCATE A MINING 
CLAIM. — Only those Avho are citizens of the United States, 
or who have declared their intention to become such, are 
allowed by the law to make a location of mineral lands in 
California. 

Revised Statutes of the United States, Section 2319. 

Section 1006.— UPON WHAT LAND MINING CLAIM 
MAY BE LOCATED.— Only unoccupied, unclaimed pub- 
lic mineral lands are locatable as a mining claim. The land 
must be public land, that is, it must be land the title to 
which is in the United States, and which is open to entry. 
Therefore, if it is land which has been expressly reserved 
by law, or if it is occupied as an Indian Reservation, it is 
not open to entry as mineral land. It must be unoccupied 
and unclaimed ; that is, it cannot be located upon if there 
is already a claimant in good faith occupying the land. 
But this does not mean every occupancy of any character, 
a mere possession without right. The occupation and claim 
to the land, in order to be a bar to location by another, 
must be^ in good faith and in compliance with the law of 
the United States. And, lastly, it must be mineral land. 
The test of the character of the land is, whether it is more 
valuable for minerals than for agricultural purposes. If 
the land contains mineral in its natural state, it is mineral 
land, and may be located upon as a mining claim. 

Section 1007.— WHAT IS MINING.— Mining is defined 
to be digging and searching for precious and economic 
metals and minerals, whether by shafts, pits, and tunnels, 
or by placer or hydraulic gravel mining; and the term 



508 BUSINESS LAWS EOR BUSINESS MEN. 

includes the mining of coal, iron, phosphate, and hydro- 
carbons, and the boring for oil and gas, as well as prospect- 
ing for any of those metals or minerals. 

Section 1008.— WHAT CONSTITUTES A VALID LO- 
CATION. — To constitute a valid location of a mining claim, 
three things are always essential. There must be, first, 
discovery of the mineral ; second, posting and recording 
of notice; third, marking the location on the ground so 
that the boundaries can be readily traced. 

Section 1009.— THE DISCOVERY.— If it is a lode claim, 
there must be an actual discovery of mineral. If a person 
should attempt to take a lode claim on land which he had 
not prospected, and knew nothing about, it would not be 
a valid location. Good faith is required by the law. And 
no location of a claim can be made until the discovery of 
the vein or lode within the limits of the claim located. To 
discover a quartz claim, means the actual finding of mineral- 
bearing rock in place, the discovery of mineral-bearing ore 
within the crevices of the rock, or incased within defined 
boundaries ; or, the discovery of such indications of the 
presence of ore within rock in place, as an experienced 
miner would feel justified in spending his time and money 
upon with the reasonable expectation of finding ore in pay- 
ing quantities. When a locator finds rock in place con- 
taining mineral, he has made a discovery within the mean- 
ing of the law% whether the earth or rock is rich or poor, 
whether it assays high or low. It is the finding of the 
mineral in the rock in place, as distinguished from float 
rock, that constitutes the discovery, and warrants the pros- 
pector in makin'g a location of a mining claim. The claim- 
ant should, therefore, prior to locating his claim, unless the 
vein can be traced upon the surface, sink a shaft or run a 
tunnel or drift to a sufiicient depth to discover and develop 
a mineral-bearing vein, lode, or crevice. He should also 
determine, if possible, the general course of the vein in 



MINIMS AND MINING. 509 

either direction from the point of discovery, by which direc- 
tion he will be governed in making the boundaries of his 
claim on the surface. What has been said on the subject 
of discovery applies only to lode or quartz claims. The 
law does not specify any actual discovery of mineral as an 
essential to the location of a placer claim, and it has been 
held in California that a location of a placer claim may be 
made w^ithout discovery of minerals being first made on 
the ground. But no patent could be obtained for a placer 
claim without proof of the mineral character of the claim. 

Section loio.— MARKING THE BOUNDARIES.— The 

boundaries must be marked in such a way that the claim 
can be identified on the ground. The locator should drive 
a post or erect a monument of stones at each corner of his 
surface ground ; and at the point of discovery, or discovery 
shaft, he should fix a post, stake, or board, on which should 
be designated the name of the lode, the name or names of 
the locators, and the number of feet claimed and in which 
direction from the point of discovery. 

Section loii.— LOCATION NOTICE.— A notice of loca- 
tion must be posted on the claim, at the point of discovery, 
or discovery shaft. 



Section^ 1012.— FORM OF NOTICE OF LOCATION 
FLODE 

lode claim 



OF LODE CLAIM.— The following is a form of location of 



Location Notice. 

NOTICE IS HEREBY GIVEN TO ALL WHOM IT 
MAY CONCERN : .That , 

a citizen of the United States, having discovered a lode or 

vein of quartz, or rock in place, bearing 

(here insert kind of mineral discovered), within the limits 
of the claim hereby located, has this day, under and in 
accordance wath the Revised Statutes of the United States, 

Chapter VII, Title 32, located (here 

state number of feet) linear feet of this vein or lode, with 



510 BUSINi:SS LAWS FOR BUSINlSSS ME^N. 

surface ground (here state number of 

feet) feet in width, situated in 

mining district, County of , State of Cal- 
ifornia, and known as (here 

state name of mine), extending feet to 

a (here describe natural 

object or monument), and feet 

to (here describe natural object or 

monument) from this notice at the discovery or prospect 
shaft, the exterior boundaries of this claim being distinctly 
marked by reference to some natural object or permanent 
monument, and more particularly described as follows, 

to-wit : 

(Here insert description.) 



and I intend to hold and work said claim as provided by 
the local customs and local rules of miners, and the mining 
Statutes of the United States. 



Dated on the ground, the day of , 19. .. 

Discovered , 19 . . . 

, locator. 

Recorded . , 19 . . . 

Section 1013.— FORM OF NOTICE OF LOCATION 
OF A PLACER CLAIM.— The following is a form of 
notice of location of a placer claim : — 

Location Notice. 

NOTICE -IS HEREBY GIVEN TO ALL WHOM IT 
MAY CONCERN : That , a 

citizen of the United States, has this day located, in accord- 
ance with the Revised Statutes of the United States, Chap- 
ter VI, Title 32, the following described placer mining 
ground, to-wit : 

(Description : If on surveyed land, describe the legal sub- 
division. If on unsurveyed land, describe as accurately as 
possible by courses and distances.) 



MINES AND MINING. 511 

Situated in mining district, County 

of , State of California. This claim shall 

be known as (here insert 

name of claim) mining claim, and I intend to work the 
same in accordance with the local customs and rules of 
miners, and the mining Statutes of the United States. 



Dated on the ground the day of , 19. .. 

Located , 19 • • • 

Recorded , 19 • • • 

Section 1014.— RECORDING LOCATION NOTICE.— 

The Congress of the United States has provided by law 
that "the location notice must be filed for record in all 
respects as required by the State laws and local rules and 
regulations, if there be any." The State of California, by 
an Act of the Legislature, has provided that notices of 
location of mining claims may be recorded in the Recorder's 
office of the county where the mining claim is situated. 
Civil Code of California, Section 11 59. 

Section 1015.— SIZE OF LODE CLAIM.— Any person 
who is a citizen of the United States, or who has declared 
his intention to become a citizen, may locate, record, and 
hold a mining claim of fifteen hundred linear feet along the 
course of any mineral vein or lode subject to location; or 
an association of persons, who are citizens of the United 
States, may make a joint location of fifteen hundred feet 
along the course of the lode or vein. The claim, according 
to the law, is not to exceed fifteen hundred feet in length. 
As to width, the law provides that the lateral extent of 
locations on veins or lodes shall in no case exceed three 
hundred feet on each side of the middle of the vein at the 
surface. Thus the extreme size of a lode claim is fifteen 
hundred feet in length by six hundred feet in width. But 
the law also gives mining districts the right to reduce the 
width of a mining claim to less than fifteen hundred feet, 
but not less than fifty feet. The laws referred to are the 



512 BUSINESS LAWS FOR BUSINESS MEN. 

laws of the United States. The State of California has 
no law of its own upon the subject. When the locator 
does not determine by survey or exploration where the 
middle of his vein at the surface is, his discovery shaft is 
taken to mark the middle of the vein. 

Revised Statutes of the United States, Section 2320. 

Section 1016.--SIZE OF PLACER CLAIM.— An indi- 
vidual may locate twenty acres as a placer claim. Two 
persons may associate themselves together and locate forty 
acres as a placer claim ; and so on up to eight persons, who 
may locate one hundred and sixty acres as a placer claim. 
But no individual can locate more than twenty acres, and 
no association of persons can locate more than one hundred 
and sixty acres. 

Revised Statutes of the United States, Sections 
2330. 2331. 

Section 1017.— DISCOVERY ON PLACER GROUND. 

— It has already been stated that there must be a valid dis- 
covery of minerals, before the location can have any legal 
effect, and that the discovery of a quartz claim must be of 
X lode or vein in rock in place. But when we come to con- 
sider a placer claim, the rule stated does not apply. The 
term ''placer" is of wide significance. It includes any form 
of mineral deposit, except quartz or other rock in place. 
All forms of mineral and metal bearing earth, other than 
veins or lodes in rock in place, are held to be ''placer." 
They cannot be fixed in place, confined within walls of 
rock, for they may be found in shifting sand, or loose 
gravel, or in the channels of rivers ; and the term "placer" 
includes natural gas, petroleum, and hydrocarbons. But 
while a valid location may be made under the laws relating 
to placer locations without a previous discovery of mineral, 
yet such discovery must be made before a patent from the 
United States Government can be issued under the Acts of 
Congress relating to the disposition of mineral lands. 



MINES AND MINING. 513 

(Decided by the Supreme Court of California in the case 
of Gregory vs. Pershbaker, which decision is printed in 
Volume 73 of the California Reports, page 109.) 

Section 1018.— TIME WITHIN WHICH LOCATION 
MUST BE MADE AFTER DISCOVERY.— The law of 

the United States does not specify any certain time within 
which location must be made, and notices posted or re- 
corded, after discovery. The location must be made, and 
the boundaries marked on the groimd, within a reasonable 
time after discovery. If local rules and customs prescribe 
a certain time, that time must be followed. 

Section 1019.— OIL AND ASPHALTUM.— Petroleum^, 
natural gas, and asphaltum are held to be mineral, and may 
be located as placer claims. INIuch controversy over the 
question, whether public land in which petroleum was found 
could be located under the mining laws, caused the Con- 
gress of the United States to pass an Act on the subject 
in 1897, which removes all doubt. The law reads : ''Any 
person authorized to enter lands under the mining laws of 
the United States may enter or obtain patent to lands con- 
taining petroleum or other mineral oil, and chiefly valuable 
therefor, under the provisions of the laws relating to placer 
and mineral claims." Therefore, twenty acres of oil lands 
may be located as a placer claim by an individual, and as 
much as one hundred and sixty acres by an association of 
persons. It is not necessary that discovery of oil should 
be first made. 

Act of Congress, approved February 11, 1897. 

Section 1020.— ANNUAL LABOR AND ASSESS- 
MENT WORK.— In order to hold a mining claim, the 
locator must do a certain amount of work each year, and 
this is measured not by time, but by the value of the work 
performed. On each claim located, whether quartz or 
placer, not less than one hundred dollars' worth of labor 

33 



514 BUSINESS LAWS FOR BUSINEJSS MEiN. 

must be done, or an equal value of improvements made, 
durmg each year until a patent has been issued for the 
claim. A failure to comply with this law forfeits the claim, 
and leaves it open for relocation by another person. But 
if the original locator, his heirs, assigns, or legal representa- 
tives, after the time has expired within which he should 
have done the assessment work, and before another person 
has located on the ground, then proceeds to do the work, 
he saves the forfeiture and recovers the claim again to 
himself. 

Revised Statutes of the United States, Section 2324. 

Section 1021.— WHEN FIRST WORK MUST BE 

DONE. — The law does not mean that the work should be 
done within a year from the date of location. The period 
for performing the assessment work commences on the first 
day of January succeeding the date of location of the claim. 
At least one hundred dollars' worth of work must be done 
each year. 

Supplement to the Revised Statutes of the United 
States, Volume i, page 276. 

Section 1022.— WHERE WORK SHOULD BE DONE. 

— Annual labor or improvements to the amount of one hun- 
dred dollars may be anywhere within the boundaries of the 
claim. But it is not absolutely necessary that this work 
be done within such boundaries. It may be done on ad- 
joining or neighboring ground, if the work so done tends 
to develop the claim, and this will be a sufficient compliance 
with the law. 

And in a case where a miner holds several claims, the 
annual labor or improvements required for the whole of 
them may be done or made upon any one or more of them, 
provided that such labor or improvements tend to develop 
them all. And even if the claim upon which the work is 
done is patented, and the remainder are unpatented, it will 
make no difference, so long as the work done tends in fact 



MINKS AND MINING. 515 

to develop, and is done for the purpose of developing, the 
unpatented claims, and as assessment work upon them. 

Work done or improvements made, for the purpose of 
developing the ground embraced in the location, outside 
of the limits of the claim, is as available for holding it as if 
done within its boundaries. Labor and improvements, 
wuhin the meaning of the law, are deemed to have been 
had on a mining claim, whether it consists of one location 
or several, when the labor is performed or the improve- 
ments are made for its development, to facilitate the extrac- 
tion of the metals it may contain; and such labor and 
improvements may lawfully be on ground which originally 
constituted only one of the locations, as in sinking a shaft; 
or the labor and improvements may be at a distance from 
the claim itself, as where the labor is performed for the 
turning of a stream, or to bring water on the claim, or where 
the improvement consists in the construction of a flume to 
carry oft the debris or waste material. (Decided by the 
Supreme Court of California in the case of De Noon vs. 
Morrison, which decision is printed in Volume 83 of the 
California Reports, page 163.) 

Section 1023.— PROOF OF ASSESSMENT WORK.- 

The law of California provides that proof of assessment 
work must be made by affidavit, within thirty days after the 
time limited for performing the labor or making the im- 
provements, particularly describing the labor performed and 
improvements made, and the value thereof. The law also 
provides that this affidavit must be recorded in the office 
of the County Recorder of the county in which the mine 
or claim is situated. ' 

Statutes of 1891, page 219. 

Section 1024.— FORM OF PROOF OF ASSESSMENT 
WORK. — The following is a form of proof of assessment 
work : — 



516 BUSINESS LAWS FOR BUSINESS MEN. 

Proof of Labor. 

STATE OF CALIFORNIA. 



County of 

Before me the subscriber personally appeared 

, who being duly sworn says, that at least 

$ioo worth of labor or improvements were performed or 
made upon (here state name of min- 
ing claim), situated in mining 

district, County of , State of California, 

during the year ending December 31, 19. .. Such expendi- 
ture was made by or at the expense of 

, owner of said claim, for the purpose of 

holding said claim. 

That the labor performed and improvements made were 
as follows, to-wit : 

(Here give a particular description of the labor performed 

and improvements made.) 

That the value of said labor was $ 

That the value of said improvements was $ 



Subscribed and sworn to before me this day 

of , 19. .. 

Notary Public in and for County of , 

State of California. 
(Note. — The above affidavit may be sworn to before a 
Notary, a Justice of the Peace, or any officer authorized by 
law to administer oaths.) 

Section 1025.— RELOCATION OF CLAIM AFTER 
FORFEITURE. — If for any reason a mining claim has 
been forfeited, by failure to do assessment work, or by 
reason of abandonment, another person may relocate it. 
He must make his location as the original locator did, and 
in his notice of location life should state that the claim was 
originally located by another person (naming him), but that 
the claim had been abandoned or forfeited. 



MINES AND MINING. 517 

Section 1026.— MINERAL ENTRIES WITHIN FOR- 
EST RESERVES.— The law provides that "any mineral 
lands in any forest reservation which have been or which 
may be shown to be such, and subject to entry under the 
existing mining laws of the United States and the rules 
and regulations applying thereto, shall continue to be sub- 
ject to such location and entry," notwithstanding the reser- 
vation. This makes mineral lands in the forest reserves 
subject to location and entry under the general mining lavv'S 
in the usual manner. 

Section 1027 —LOCATION BY AGENTS.— A location 
of a mining claim may be made in the name of another than 
the actual locator, and when so made, the person in whose 
name it is made becomes vested with the legal title to the 
claim. A prospector may locate for himself, and then make 
other locations in the names of others, and he will be con- 
sidered the agent of the persons in whose names the loca- 
tions are made. (Decided by the Supreme Court of Cali- 
fornia in the case of Moore vs. Hamerslag, which decision 
is printed in Volume 109 of the California Reports, page 
122.) 

Section 1028.— LOCATION BY MINORS.— A valid lo- 
cation of a^ mining claim may be made by a minor. The 
law allows any one who is a citizen, or who has declared 
his intention to become such, to locate a mining claim. The 
law does not require that the locator shall be of any par- 
ticular age. In a California case the Supreme Court held 
that a minor can make a location of a mining claim in this 
State, saying: "Nor -is there any reason in the nature of 
things why a minor may not make a valid location. After 
the preliminary steps are taken, all that is required is that 
a certain amount of work shall be done. If the minor can- 
not do it, he can get any one to do it for him, and the con- 
dition imposed by the statute is fulfilled. If he cannot, 
the claim lapses, and is open to relocation by others. It 



518 BUSINESS LAWS FOR BUSINESS MEN. 

may be added that so far as we know it is the practice 
of many mining communities for minors to locate claims." 
(Decided by the Supreme Court of California in the case of 
Thompson vs. Spray, which decision is printed in Volume 
J2 of the California Reports, page 528.) 

Section 1029.-- TUNNEL CLAIMS.— The laws of the 
United States provide for certain tunnel claims, where a 
tunnel is run for the discovery of "blind lodes or veins ;" 
and so long as the tunnel claimant operates his tunnel, the 
law reserves in his favor 3,000 feet from the face of the 
tunnel, with 1,500 feet in the opposite direction on the strike 
of the vein, from either wall of his tunnel. The law states 
that the owner of the tunnel shall have the right of pos- 
session of all veins or lodes within 3,000 feet from the face 
of such tunnel, on the line thereof, not previously known 
to exist, discovered in the tunnel, to the same extent as if 
discovered upon the surface. Locations on the line of such 
tunnel, of veins or lodes not appearing on the surface, made 
by other parties after the commencement of the tunnel, and 
while it is being prosecuted with reasonable diligence, are 
invalid. Failure to prosecute the work on the tunnel for 
six months is considered as an abandonment of the right 
to all veins on the line not discovered when the work ceased. 
Revised Statutes of the United States, Section 2323. 

Section 1030.— LOCATION OF TUNNEL CLAIM.— 

The term "face," as used in the tunnel claim law, means the 
first working face formed in the tunnel, and signifies the 
point at which the tunnel actually enters cover, it being 
from this point that the 3,000 feet are to be counted 
upon which prospecting is prohibited. To avail them- 
selves of the benefits of this provision of law, the pro- 
prietors of a mining tunnel will be required, at the time 
they enter cover, to give proper notice of their tunnel loca- 
tion by erecting a substantial post, board, or monument 
at the face or point of commencement thereof, upon which 



MINES AND MINING. 510 

should be posted a good and sufficient notice, giving the 
names of the parties or company claiming the tunnel right; 
the actual or proposed course or direction of the tunnel ; 
the height and width thereof, and the course and distance 
from such face or point of commencement to some perma- 
nent, well-known objects in the vicinity; and at the time 
of posting such notice they should, in order that miners 
or prospectors may be enabled to determine whether or 
not they are within the lines of the tunnel, establish the 
boundary lines thereof, by stakes or monuments placed 
along such lines at proper intervals, to the terminus of the 
3,000 feet from the face or point of commencement of 
the tunnel, and the lines so marked will define and govern 
as to the specific boundaries within which prospecting for 
lodes not previously known to exist is prohibited while work 
on the tunnel is being prosecuted with reasonable diligence. 
A copy of the posted notice may be filed with the County 
Recorder, and should also be filed with the Recorder of the 
mining district, if any ; with an affidavit attached of the 
owners, claimants, or projectors of the tunnel, stating the 
amount expended by themselves and their predecessors in 
interest in prosecuting the work; the extent of the work 
performed ; and that it is their intention in good faith to 
prosecute the work on the tunnel with reasonable diligence 
for the development of a vein or lode, or for the discovery 
of mines. ^ 

Section 1031.— LODE AND PLACER CLAIMS IN 
THE SAME GROUND.— It sometimes occurs that a lode 
will be discovered within the boundaries of a placer claim. 
In that event, the owners of the placer claim have an im- 
mediate right to apply to the Government for a patent, and 
the application must state the existence of the lode. The 
Government will then issue a patent for the lode, fifty feet 
in width, upon the payment of $5.00 per acre ; and also a 
patent for the placer portion of the land upon the payment 
of $2.50 per acre. If the owner of a placer claim makes 



520 BUSINESS LAWS FOR BUSINESS MEN. 

application for a patent, without mentioning a known vein 
or lode within its boundaries, any other person may locate 
the lode, in the same manner as any other quartz claim is 
located, but acquiring only 1,500 by 50 feet. 

Revised Statutes of the United States, Section 2333. 

Section 1032.— MILL SITES.— The owner of a lode 
claim may also locate, in the same manner as mining claims 
are located (that is, by posting and recording notice, and 
erecting monuments for identification), five acres of non- 
mineral land for a mill site. The mill site need not be 
adjacent to the mining claim. It must be used for a mill 
site in connection with the mining claim, where a mill site 
is located by the owner of a lode claim. But the law 
further provides that the owner of a quartz-mill or reduc- 
tion-works, not owning a mine in connection therewith, 
may also locate a mill site, not exceeding five acres of non- 
mineral land, and obtain a patent for it. 

Revised Statutes of the United States, Section 2337. 

Section 1033.— TIMBER FOR MINING PURPOSES.— 

The law allows sufficient timber to be cut on mineral land 
for the proper working of the mine proper. Timber for 
the mine, shafts, or tunnels, for houses for employees, and 
other purposes in the working of the mine, may lawfully 
be cut and used. 

Section 1034.— WATER AND WATER RIGHTS FOR 
MINING PURPOSES.— For the law as to water and 
water rights for mining purposes, see Part IX, title, ''Water 
and Water Rights." 

Section 1035.— MINING PARTNERSHIPS —For the 

lav^ as to mining partnerships, see under the heading-. ''Part- 
nership. ' ' 



MINKS AND MINING. 521 

■ Section 1036.— LIENS ON MINING CLAIMS.— For the 

law as to liens on mining claims, see under the heading, 
''Mechanics' Liens." 

Section 1037.— ENTRY OF COAL LANDS.— Coal lands 
may be entered without making the location required for 
other claims. There is a difference, also, in the persons 
qualified to take coal lands, and in the number of acres 
which can be taken. The person Avho takes coal land must 
not only be a citizen of the United States, or have declared 
his intention to become such, but he must also be over 
the age of 21 years. Within sixty days after the date of 
actual possession and the commencement of improvements 
on the land, an individual may enter at the Land Office in 
the district any quantity of vacant coal lands not exceeding 
160 acres. An association of persons may enter not ex- 
ceeding 320 acres. The price to be paid for coal lands is 
$20 per acre, for lands within fifteen miles of a completed 
railroad, or $10 per acre for lands more than fifteen miles 
from a completed railroad. 

Revised Statutes of the United States, Section 2348. 

Section 1038.— HOV/ TO OBTAIN A PATENT TO A 

MINING CLAIM.— The Revised Statutes of the United 
States, Sec4;ion 2335, provide the manner in which a patent 
to a mining claim may be obtained. It will be seen from 
what follows that the claim-owner wdio desires a patent 
must go to a lawyer, to have his application made out, and 
the various plats and notices properly filed and published; 
and as he cannot safely use any of the necessary forms 
himself, without the' aid of a competent lawyer, the forms 
are not given in this book. The claimant who wants a 
patent is required, in the first place, to have a correct survey 
of his claim made, under authority of the United States 
Surveyor-General for California ; such survey to show with 
accuracy the exterior surface boundaries of the claim, which 



522 BUSINESS LAWS FOR BUSINESS MEN. 

boundaries are required to be distinctly marked by monu- 
ments on the ground. Section 2335 of the United States 
Revised Statutes is as follows : "A patent for any land 
claimed and located for valuable deposits may be obtained 
in the following manner: Any person, association, or cor- 
poration authorized to locate a claim under this chapter, 
having claimed and located a piece of land for such pur- 
poses, who has, or have, complied with the terms of this 
chapter, may file in the proper land office an application 
for a patent, under oath, showing such compliance, together 
with a plat and field notes of the claim or claims in com- 
mon, made by or under the direction of the United States 
Surveyor-General, showing accurately the boundaries of the 
claim or claims, which shall be distinctly marked by monu- 
ments on the ground, and shall post a copy of such plat, 
together with a notice of such application for a patent, in 
a conspicuous place on the land embraced in such plat pre- 
vious to the filing of the application for a patent, and shall 
file an affidavit of at least two persons that such notice 
has been duly posted, and shall file a copy of the notice in 
such land office, and shall thereupon be entitled to a patent 
for the land, in the manner following: The register of the 
land office, upon the filing of such application, plat, field 
notes, notices, and affidavits, shall publish a notice that 
such application has been made, for the period of sixty days, 
in a newspaper to be by him designated as published near- 
est to such claim ; and he shall also post such notice in his 
office for the same period. The claimant at the time of 
filing this application, or at any time thereafter, within 
sixty days of publication, shall file with the register a cer- 
tificate of the United States Surveyor-General that five 
hundred dollars' worth of labor has been expended or im- 
provements made upon the claim by himself or grantors ; 
that the plat is correct, with such further description by 
such reference to natural objects or permanent monuments 
as shall identify the claim, and furnish an accurate descrip- 
tion, to be incorporated in the patent. At the expiration 



MINKS AND MINING. 52.*^ 

of the sixty days of publication, the claimant shall file his 
affidavit, showing that the plat and notice have been posted 
in a conspicuous place on the claim during such period of 
publication. If no adverse claim shall have been filed with 
the register and the receiver of the proper land office at the 
expiration of the sixty days of publication, it shall be as- 
sumed that the applicant is entitled to a patent, upon the 
payment to the proper officer of five dollars per acre, and 
that no adverse claim exists." 

Revised Statutes of the United States, Section 2335. 

Section 1039. — MINING LEASE. — A mining lease is 
necessarily dififerent in many respects from the ordinary 
lease, for it must provide for amount and character of 
work to be done, timbering, the use of machinery, inspec- 
tion of work and mine, the payment of royalty, and pos- 
sibly other matters, which never enter into leases of other 
property. 

A mining lease must be in writing, if the term is for 
more than one year. 

Section 1040.— FORM OF MINING LEASE.— The fol- 
lowing is a form of mining lease : — 

THIS INDENTURE, made this day of 

, in the year of our Lord one thousand nine 

hundred and , between 

, lessor, and , lessee or 

tenant, Witnesseth, That the said lessor for and in con- 
sideration of the rents, royalties, covenants, and agreements 
hereinafter reserved, and by the said lessee to be paid, kept, 
and performed, has granted, remised, and let, and by these 
presents does grant, remise, and let unto the said lessee, all 
the following described mine and mining property, situated 

in , . mining district, County of , 

State of California, to-wit : 

(Description of property.) 

Together with the appurtenances , to 

have and to hold unto the said lessee or tenant for the term 



524 BUSINESS LAWS FOR BUSINESS MEN. 

of years from the date hereof, expiring at 

noon on the day of , A. D. 

, unless sooner forfeited or determined through the 

violation of any covenant hereinafter against the said ten- 
ant reserved. 

And in consideration of the said demise, the said lessee 
does covenant and agree with said lessor as follows, 
to-wit : — 

To enter upon said mine or premises and work the same 
mine fashion, in manner necessary to good and economical 
mining, so as to take out the greatest amount of ore pos- 
sible, with due regard to the safety, development, and 
preservation of the said premises as a workable mine. 

To work and mine said premises as aforesaid steadily and 
continuously from the date of this lease; and that any 

failure to work said premises with at least 

persons employed for the space of consec- 
utive days may be considered a violation of this covenant. 

To well and sufficiently timber said mine at all points 
where proper, in accordance with good mining; and to 
repair all old timbering wherever it may become necessary. 

To allow said lessor and his agents to enter upon 
and into all parts of said mine for the purpose of inspec- 
tion, with use of all passages, ropes, windlass, ladder-ways, 
and all other means of ingress and egress for such purpose. 

To not assign this lease, or any interest thereunder, and 
to not sublet the said premises or any part thereof, without 
the written assent of said lessor, and to not allow any per- 
son or persons except the said lessee and his workmen to 
take or hold possession of said premises or any part thereof 
under any pretense whatever. 

To occupy and hold all cross or parallel lodes, dips, spurs, 
feeders, crevices, or mineral deposits of any kind, which 
may be discovered in working under this lease, or in any 

tunnel run to intersect said . lode, or by the said 

lessee or any person or persons under him in any man- 
ner at any point within feet of the center 

line of said lode, as the property of said lessor; with privi- 
lege to said lessee of working the same as an appurtenance 
of said demised premises, during the term of this lease; and 
to not locate or record the same, or allow the same to be 
located or recorded, except in the name of said lessor. 

To keep at all times the drifts, shafts, tunnels, and other 



MINKS AND MINING. OZO 

passages and workings of said demised premises thor- 
oughly drained and clear of loose rock and rubbish of all 
kinds. 

To pay and deliver to said lessor as royalty, 

of all ore to be extracted from said premises during said 
term, of like assay to that retained by said lessee, delivered 

at as soon as mined, without offset, 

deduction, or charge whatever, except lessor's proportion 
for packing. 

To deliver up to said lessor the said premises, with the 

appurtenances and all improvements in 

good order and condition, with all shafts and tunnels and 
other passages thoroughly clear of rubbish and drained, and 
the mine in all points ready for immediate continued work- 
ing (accidents not arising from negligence alone excusing), 

without demand or further notice, on said day of 

, A. D , at noon, or at any time previous, 

upon demand for forfeiture. 

And finally, upon the violation by said lessee, or any per- 
son under him, of any covenant or covenants herein- 
before reserved, the term of this lease shall, at the option 
of said lessor, expire, and the same and said premises with 
the appurtenances shall become forfeit to said lessor; and 
said lessor or his agent may thereupon, after demand 
of possession in writing, enter upon said premises and dis- 
possess all persons occupying the same, with or without 
force, and with or without process of law ; or at the option 
of said lessor, the said tenant and all persons found in 
occupation may be proceeded against as trespassers from 
the beginning of said term both as to realty and the ore 
served thefefrom ; or as guilty of unlawful detainer. 

Each and every clause and covenant of this indenture 
shall extend to the heirs, executors, and administrators of 
all parties hereto; and to the assigns of said lessor; and as 
said lessor may elect, to the assigns of said lessee. 

In witness whereof, The said parties, lessor and lessee, 
have hereunto set their hands and seals the day and year 
first above written. 

(Seal.) 

(Seal.) 

(Here add acknowledgment before Notary Public.) 

Section 1041.— OIL AND GAS LEASES.— The law is 
more strictly applied to leases for oil and gas purposes than 



526 BUSINESS LAWS FOR BUSINESS MEN. 

to any others. Other minerals, being of soHd formation, 
are in place within certain boundaries, or, being placer, 
yet are not usually shifting nor fluctuating. Oil and gas 
are fugitive and wandering, and their existence within the 
limits of a particular tract is uncertain. Some of the prin- 
ciples of law applied to oil and gas leases are as follows : — 

(a) — Right to Bore for Oil Necessarily Exclusive. — The 

Supreme Court of the United States has decided that the 
right to bore for oil or gas within a given area is necessarily 
exclusive, owing to the peculiar nature of the operations- 
Therefore, if the owner of land leases to another the right 
to bore for oil or gas within a certain described area, he is 
prohibited, whether expressed in the lease or not, from 
boring another well therein himself, and he may be pre- 
vented by injunction from interfering with the exclusive 
rights of the lessee. (Decided by the Supreme Court of the 
United States in the case of Brown vs. Spillman, which 
decision is printed in Volume 155 of the United States 
Supreme Court Reports, page 665.) 

(b) — Lessee Must Begin Operations Within a Reason- 
able Time. — If the lease is silent as to the time when the 
lessee must begin boring, the law fills the gap by providing 
that he must begin operations within a reasonable time. 
What is a reasonable time w411 depend upon the particular 
case and all the circumstances ; for instance, the nature of 
the country, the ease or difficulty with which machinery 
may be brought on the ground, the availability of labor, etc. 

(c) — Failure to Commence Work Forfeits the Lease. — 

Although the lease is for a definite term, yet a failure to 
commence work within the time named, or, if no time is 
named, within a reasonable time, forfeits the lease. 

(d) — Work Must Be Prosecuted with Diligence. — When 
work is once begun, it must be carried on with diligence. 



MINES AND MINING. 527 

This does not mean every day, or every hour. But there 
must not be any unreasonable or prolonged cessation from 
actual operations. The work must be carried on so stead- 
ily, and w^ith such practical application, as will show the 
good faith of the lessee. 

(e) — Lease Must Be Literally Complied With. — An oil 

lease must be literally complied with. If the lessee agrees 
to sink a well of a certain bore, he will not comply with his 
lease by sinking a well of a smaller bore. He must give it 
the size and capacity agreed on. 

(f) — Failure to Find Oil. — Where the lease is for a fixed 
period, and as much longer as oil is found or produced in 
paying quantities, if oil is not found in paying quantities 
within the. time, the lease is forfeited. 

(g) — Net Proceeds. — Where the lessee agrees to pay the 
lessor one-tenth, or any other portion, of the profits realized 
from the sale of the oil produced, the word "profits" does 
not mean the gross output, but only the net amount real- 
ized after deducting expenses. 

(h) — Failure to Pay Royalty. — A failure to pay the roy- 
alty agreed on by the lessee will forfeit the lease, at the 
option of ^he lessor. 

Section 1042.— FORM OF OIL LEASE.— The following 
is a form of oil lease. The lease, if it is to be recorded, 
should be acknowledged. 

THIS LEASE, Made the day of , 

A. D. 19. ., by and .between 



of the County of , State of California, lessor. 

and 



lessee 



528 BUSINESS LAWS FOR BUSINESS MEN. 

WITNESSETH: That said lessor.., for and in consid- 
eration of the rents, covenants, and agreements hereinafter 
mentioned, reserved, and contained on the part and behalf 
of said lessee. . to be paid, kept, and performed, does by 
these presents grant, remise, and let unto said lessee. ., the 
exclusive right, privilege, and easement of sinking, boring, 
developing, and working to any desired depth, wells for the 
extraction of natural gas, petroleum, kerosene, coal oil, and 
other oil, gaseous and volatile substances, and of taking 
from such wells, and appropriating, having, using, and 
disposing of any and all of said substances, in all the certain 

tract of land situate in the County of , State 

of California, described as follows, to-wit : 

(Here describe land.) 



and also the right, privilege, and easement of conducting 
and carrying away from said wells and other wells that 
may be sunk or bored by said lessee., on adjacent and 
contiguous lands through pipes underground, as herein- 
after provided, all natural gas, petroleum, kerosene, coal oil, 
and other oil, gaseous, and volatile substances extracted 
from said wells. 

To have and to hold all of said rights, privileges, and 

easements unto said lessee. . exclusively from the 

day of , A. D. 19. ., for and during the term 

of years, with the right to said 

lessee. . to a renewal of this lease from said lessor. . for a 

second term of years, from and after the 

expiration hereof upon the terms hereinafter provided. 

Said lessor. . further agrees that said lessee. . may oc- 
cupy and use at one or more places on said tract of land, 

an area not to exceed acres, 

upon Avhich to sink a well, wherever a well may be bored 
thereon. A piece of land shall be selected- wdthout un- 
necessary injury to the lessor.., of such shape as the 
lessee . . may desire for boring such wells and operating the 
machinery used in boring, working, and casing the same, 
and care and storage of the product, said piece of land to be 
so used so long during the term of this lease as is necessary 
for said purposes. 

It is further understood, that should any natural gas, 



MINKS AND MINING. 529 

« 

petroleum, kerosene, coal oil, or other oil, gaseous or vola- 
tile substances be produced from said wells, or from wells 
sunk or bored by the lessee on adjacent or contiguous 
lands, the said lessee shall have the right to enter upon 
said lands and dig trenches from said w^ells through said 
lands, without unnecessary injury to the lessor; and lay 
pipes therein for conveying away therefrom any and all 
of said substances, provided the top or upper surface of 

said pipes are laid at least inches below the 

surface of the ground, and the trenches in which they are 
laid are well filled in with earth so as not to interfere with 
the full and free cultivation or other use or enjoyment of 
said lands by the lessor, but no such trenches are to be dug 

so as to interfere with the use of or to injure 

or other improvements on said prem- 
ises at the time such trenches are dug, and none are to be 

dug through any 

without giving the owner written notice thereof, and pay- 
ing therefor the value of all property injured or destroyed 
thereby; and no pipe is to be laid across any creek or 
slough so as in any way to obstruct or interfere with the 
free and full flow of water through the same, and all pipes 
laid through said lands are to be made tight and secure 
so as not to permit the escape therefrom of any substances 
injurious to any property, and should any such substance 
escape from such pipes and injure any such property (and 
the lessee should fail to repair such pipes and prevent such 

escape and stop such injury, within days 

after receiving from the lessor a written notice so to do), 
then the lessee shall be liable for and shall pay to the owner 
all damages' so caused. 

It is further understood and agreed by and between the 
parties hereto, that the lessee, so long as this lease remains 
in full force, is to be the sole and exclusive owner for and 
during the full term of this lease, and of every renewal 
thereof, of all natural gas, petroleum, kerosene, coal oil, 
and other oil, gaseous and volatile substances extracted 
from wells on said land ; and the lessor shall have no right 
during the continuance of this lease or any renewal thereof 
before default in the payment of the royalty hereafter men- 
tioned, to bore or sink any well or wells for natural gas, 
petroleum, kerosene, coal oil, or other oil, gaseous or vola- 
tile substances on any of said land, or to use or take any 
34 



530 BUSINi:SS LAWS :FOR BUSINGS MEN. 

such substances therefrom ; but the lessor is at all times 
to be the sole and exclusive o.wner of all water that may 
flow therefrom, provided that the lessee may use sufficient 
of said water to operate and run any steam engines and 
boilers used at or near said well for boring or working the 
same, and subject to the uses herein provided, shall permit 
the flow of water from said wells for the use and benefit 
of the lessor, so far as the same may flow without inter- 
fering with the proper use of the wells by the lessee. 

And the lessee shall have the right at all times during the 
continuance of this lease or any renewal thereof, to enter 
upon and pass over said land to and from all wells bored 
thereon as herein provided ; but he is to do no damage to 
any of said premises without paying a fair and reasonable 

compensation therefor within days after such 

damage is done, and will give the lessor notice in writing 
before commencing to bore a well on any portion of said 
land. 

It is further understood and agreed, that the lessee shall 
at all times during the existence of this lease have the right 
to enter upon and remove from said land all improvements, 
machinery, well-casing, and all other property placed by 
him thereon or in wells thereon. 

It is further understood and agreed, that the lessee shall, 
so long as this lease remains in force, pay to the lessor the 

value at the well or wells of the part 

of all the gas, oil, or other products herein mentioned, said 
value to be ascertained and fixed at the point of production, 

on or before the day of each month, and 

payment shall be made on the day of each 

and every month for all gas, oil, or other products produced 
during the preceding calendar month. 

It is expressly and distinctly understood and agreed 
between the parties hereto, that it shall at all times be the 
privilege of the lessee to discontinue and terminate this 
lease by a failure to pay any installment of monthly royalty 

within days after the same becomes due as 

herein provided, and such failure shall operate ipso facto 
as a surrender of this lease, and upon such surrender the 
lessee shall be discharged from all liability to pay any rent 
to become due by the terms of this lease. 

And should any well or wells bored or sunk on said land 
as herein provided be abandoned by the lessee, he shall 
give the lessor days' v/ritten notice of his 



mine:s and mining. 531 

intention to abandon the same. If the lessor so desires, 

and shall pay to said lessee within days 

the cost of the casing already in said well or wells, the 
lessee agrees to sell the same to the lessor at the actual 
cost of said casing delivered at the mouth of the well, and 
thereupon the lessor shall become the owner of such well 
or wells and all of the products thereof of any kind or 
nature. 

Nothing herein contained is to be so construed as to affect 
the right of the lessor to fully possess, occupy, and enjoy 
said lands subject to the conditions herein expressed in 
favor of the lessee. 

It is understood and agreed between the parties hereto 
that wherever the term lessor is used in this lease, it ex- 
tends to and includes the heirs, executors, administrators, 
and assigns of the lessor named herein; and the term lessee 
extends to and includes the heirs, executors, administrators, 
and assigns of the lessee herein named. 

And now it is further understood and agreed by all the 
parties hereto, that if none of said natural gas, oil, or other 
kindred substance is found in or near said lands, and the 
lessee does not proceed to develop said leased lands within 

months from this date, and 

complete a well within months there- 
after, then this lease shall terminate and be of no value, 
otherwise to remain in full force and effect. 

In witness whereof, the said parties have hereunto set 
their hands and seals tl>e day and year first above written. 

(Seal.) 

(Seal.) 

Section 1043.— MINING DEEDS.— A mining claim may 
be sold and transferred by deed, either before or after a 
patent has been applied for or obtained. The locator of a 
mining claim obtains the legal title by his location, and 
mav transfer his title -at anv time. 



Section 1044.— FORM OF MINING DEED.— The fol- 
lowing is a form of mining deed for quartz. If used for 
placer claim, the description should be changed so as to 
apply : — 



532 BUSINESS LAWS FOR BUSINESS MEN. 

THIS INDENTURE,, made the day of 

, in the year of our Lord one thousand nine 

hundred and , between 

, of the County of , and State 

of Cahfornia, party of the first part, and 

, of the County of , and State 

of Cahfornia, party of the second part; 

Witnesseth, That the said party of the first part, for and 
in consideration of the sum of Dol- 
lars, lawful money of the United States of America, to him 
in hand paid b}^ the said party of the second part, the 
receipt whereof is hereby acknowledged, hath granted, bar- 
gained, sold, remised, released, and forever quitclaimed, 
and by these presents does grant, bargain, sell, remise, 
release, and forever quitclaim, unto the said party of the 

second part, his heirs and assigns, the 

lode, as located, surveyed, recorded, and held by said party 
of the first part, situated in mining dis- 
trict, County, State of California, and 

named and called Mine, together with 

all the dips, spurs, and angles, and also all the metals, ores, 
gold and silver bearing quartz, rock, and earth therein, 
and all the rights, privileges, and franchises thereto inci- 
dent, appendant, and appurtenant, or therewith usually 
had and enjoyed ; and also, all and singular the tenements, 
hereditaments, and appurtenances thereunto belonging, or 
in any wise appertaining, and the rents, issues, and profits 
thereof; and also, all the estate, right, title, interest, prop- 
erty, possession, claim, and demand whatsoever, as well in 
law as in equity, of the said party of the first part, of, in, 
or to the said premises, and every part and parcel thereof, 
with the appurtenances. 

To have and to hold, all and singular, the said premises, 
together with the appurtenances and privileges thereto in- 
cident, unto the said party of the second part, his heirs 
and assigns forever. In witness whereof the said party 
of the first part has hereunto set his hand and seal the 
day and year first above written. 

(Seal.) 

(Here add acknowledgment before Notary.) 

Section 1045.— WORKING MINE ON SHARES.— A 

valid agreement may be made for the working of a mine 



MINES AND MINING. 583 

on shares, and sncli agreement does not eonstitute and 
will not be considered a lease of the mining claim. Under 
such a contract, the parties have a common interest in the 
products of the mine when taken out. Such a contract does 
not create the relation of landlord and tenant, but fixes a 
rule of compensation for services rendered. It is, in all its 
essential features, a contract for labor to be performed and 
to be paid for by a share ^f the profits realized from such 
labor. (Decided by the Supreme Court of California in the 
case of Hudepahl vs. Liberty Hill Mining Co., which de- 
cision is printed in Volume 80 of the California Reports, 
page 553-) 

Section 1046.— Vv HEN BOUNDARY MARKS ARE 
SUFFICIENT. — The boundary marks are always sufficient 
to sustain a location if they are so distinct and plain that the 
claim can be identified on the ground. In a case in Siskiyou 
County, two adjoining mining claims were each marked at 
the corners by four stakes about a foot and a half long, flat- 
tened on two sides, and driven into the ground about four 
inches ; two stakes being at the ends of the dividing line com- 
mon to both claims ; some stakes being in the brush, and oth- 
ers in the open ground. In the middle of the dividing line 
was a tree blazed on both sides, on one of which the notices 
of location were posted, describing the claims by courses and 
distances, rlmning from the tree to a stake, and from stake 
to stake to point of beginning. The ledge on both claims 
had been sufficiently developed to show its existence and 
direction. The Supreme Court held that the law^ as to 
marking the location on the ground was sufficiently com- 
plied with, under the most stringent construction of the 
law. (Decided by the Supreme Court of California in the 
case of Eaton vs. Norris, which decision is printed in Vol- 
ume 131 of the California Reports, page 561.) 

Section 1047.— ERROR IN DESCRIPTION IN LOCA- 
TION NOTICE. — The description in a notice of location 



534 BUSINl^SS LAWS FOR BUSINESS ME:n. 

of a mining claim, specifying the number of acres claimed, 
is sufficient, if it designate the land by the adjoining tracts 
on the north, east, and south, and by unoccupied lands on 
the west; and the insertion of the wrong legal subdivisions 
will not invalidate it. (Decided by the Supreme Court of 
California in the case of Duryea vs. Boucher, which decision 
is printed in Volume 67 of the California Reports, page 141.) 

Section 1048.— CHARACTER OF ANNUAL ASSESS- 
MENT WORK.— Whether the character of the annual 
assessment work is of the kind required by law is always 
a question of fact, to be determined by the surrounding 
circumstances. Not all expenditures made with a view to 
working a mine would be considered work expended upon 
a mine for the purpose of holding it; as, for instance, work 
done at a distance from the mine in the construction of a 
mill. On the other hand, it has been decided that the 
services of a watchman looking after the buildings erected 
to work a mine properly constitutes assessment work, 
though the mine is idle at the time. (Decided by the vSu- 
preme Court of California in the case of Altoona Quick- 
silver Mining Co. vs. Integral Quicksilver Mining Co., 
which decision is printed in Volume 114 of the California 
Reports, page 100.) 

Section 1049.— TIME WITHIN WHICH RELOCA- 
TION CAN BE MADE.— The law of California gives to 
the occupant of a mining claim thirty days after the expira- 
tion of the year within which to file his affidavit of assess- 
ment work done, in the office of the County Recorder; and 
the mine is not open to relocation until after the expira- 
tion of the thirty days. For instance, the occupant has 
the whole of the calendar year succeeding the date of his 
location in which to do his assessment work; then he has 
thirty days more in which to file his affidavit of work done 
with the County Recorder, and no relocation can be valid 
within such times. (Decided by the Supreme Court of 



MINES AND MINING. 5J5 

California in the case of Harris vs. Kellogg, which decision 
is printed in Volume 117 of the California Reports, page 
484.) 

Statutes of 1891, page 219. 

Section 1050.— RESUMPTION OF WORK.— As already 
stated, the locator of a mining claim must expend upon it 
in labor or improvements $100 each year, and non-compli- 
ance with this requirement renders the claim subject to 
relocation by others, unless, before such relocation, the 
original locator, his heirs, assigns, or legal representatives, 
have resumed w^ork upon the claim. This resumption of 
work, however, must be bona fide in character and with the 
intention of completing the amount of work due. It is 
not sufficient, when the claim has become subject to reloca- 
tion, for the claimant to go upon it and do a few hours' or 
a few days' work, and then quit, thinking that he has thus, 
by such perfunctory resumption, done all that is sufficient 
to hold his claim for another year; he must resume work 
in good faith, with the intention of completing the full 
amount required by law. (Decided by the Supreme Court 
of California in the case of McCormick a^s. Baldwin, which 
decision is printed in Volume 104 of the California Reports, 
page 227.) 

Section ^051.— FAILURE TO COMPLY WITH LO- 
CAL CUSTOMS IN WORKING MINING CLAIMS.— A 

right to hold and work a mining claim v/hen acquired may 
be lost by a failure or neglect to comply with the rules 
and regulations of the miners, relative to the acquisition 
and tenure of claims, in force in the district where the 
claim is located ; and if such rules and regulations are not 
complied with by those holding claims in the district, the 
ground becomes once more open to the occupation of the 
next comer. (Decided by the Supreme Court of California 
in the case of St. John vs. Kidd, which decision is printed 
in Volume 26 of the California Reports, page 263.) 



536 BUSINESS LAWS I^OR BUSINESS MEN. 

Section 1052.— OVERLAPPING LOCATIONS.— It is 

familiar history in mining districts that claims have often 
been found to overlap one another to a greater or less 
extent. When this occnrs, the law of California is. in so 
far as the ground taken was vacant, each location, if prop- 
erly made in other respects, is valid and sufficient to that 
extent. As to the ground actually covered by the two 
locations, the right will be determined by ascertaining 
which location was first made. If A makes a location 
to-day, and B makes a location to-morrow, and the location 
of B covers a part of the ground located by A the day before, 
B will lose so much of his location as overlaps the location 
of A ; for A was first in time, and thus acquired a prior 
right. But B will not lose his whole location. So much 
of it as does not overlap the prior location will be good, 
and he can hold that much. (Decided by the Supreme 
Court of California in the case of Doe vs. Tyler, which 
decision is printed in Volume 73 of the California "Reports, 
page 21.) 

Section 1053.— INTERSECTING VEINS.— Where two 

veins or lodes of mineral belonging to different owners 
intersect, the owner of the vein which vv^as first located has 
the right to the ore in the space of intersection, but the 
other owner has a right of way through such space for the 
purpose of working his vein. (Decided by the Suprem.e 
Court of California in the case of Wilhelm vs. Silvester, 
which decision is printed in Volume loi of the California 
Reports, page; .SSS.^I 

Section 1054.— RULE THAT END LINES SHALL 
PARALLEL EACH OTHER.— The Revised Statutes of 
the United States say that ''the end lines of each claim 
shall be parallel with each other." But this does not mean 
that the two end lines must be exactly parallel. In the 
case of Doe vs. Sanger, a San Bernardino County mining 
suit, the Supreme Court of California stated the true rule, 



MINES AND MINING. 537 

as follows : "It has been held that the provisions of the 
Federal statutes relating to lode claims were passed with 
the understanding, founded upon the general practice of 
miners, that the surface locations of such claims will be 
made lengthwise along the general direction of the lode 
or vein in the general form of a parallelogram, with the 
side lines along the lode, and the end lines across it. But 
suppose that a surface location should be made, for instance, 
in the shape of an octagon. In such a case there would be 
no end lines and no side lines, and if the locator could go 
outside his lines in one direction he could do so in eight 
directions, and encroach upon his neighbors from every 
point of the compass. If, however, a location is made in 
substantial compliance with the intent of the statute — that 
is, where there are two side lines running along the course 
of the vein, and two shorter end lines running across it, 
so that the two sets of lines are distinct, and apparent — 
such a location is not void, but gives the right to follow a 
vein laterally, although the original end lines may not be 
exactly parallel, or although they may differ from a true 
parallel." (Decided by the Supreme Court of California 
in the case of Doe vs. Sanger, which decision is printed 
in Volume 83 of the California Reports, page 203.) 

Section 1055.— EXTRA-LATERAL RIGHT, OR 
RIGHT TO PURSUE THE VEIN OR LODE ON ITS 
DIP BEYOND THE SIDE LINES OF THE CLAIM.— 

Section 2322 of the Revised Statutes of the United States 
provides : "The locators of all mining locations shall have 
the exclusive right of possession and enjoyment of all the 
surface included within the lines of their locations, and 
all veins, lodes, and ledges throughout their entire depth 
the top or apex of which lies inside of such surface lines 
extended downward vertically, although such veins, lodes, 
or ledges may so far depart from a perpendicular in their 
course downward as to extend outside of the vertical side 
lines of such surface locations." A mineral vein or lode 



538 BUSINESS LAWS FOR BUSINESS MI:n. 

seldom or never descends vertically into the earth, but on 
its downward course makes an angle with the vertical — 
or, in popular terms, it does not go straight down, but in 
a slanting direction — so that, if followed far enough into 
the interior of the earth, it will eventually be found to ex- 
tend outside of the side lines of the claim. In other words, 
the vein eventually reaches the point in the interior of the 
earth where, if a vertical line were run to the surface it 
would strike a point outside the surface boundaries of the 
claim. The right to thus follow the vein on its downward 
course beyond the side lines of the claim is sometimes called 
the extra-lateral right, and is conferred by the Section 
of the Revised Statutes of the United States just quoted. 
In thus following the vein on its dip, the miner is confined, 
however, to that part of it which is found between the end 
lines of his claim extended in their own direction. The 
law prescribes that the end lines of a claim shall be parallel 
with each other. Yet for the full enjoyment of this 
extra-lateral right it is important that the end lines of 
the claim should follow this requirement of parallelism; 
for it has been held by the courts that where the end lines 
were not parallel, but converged in the direction of the 
dip of the vem, the miner could not pursue the vein outside 
of his side lines beyond the point where his converging end 
lines extended met. On the other hand, where the end 
lines diverged in the direction of the dip, thus making the 
portion of the vein included within them larger the farther 
such end lines were extended, it has been held that the 
miner could not take the ore from any greater length of 
vein outside of his side lines than was included between his 
end lines as laid down on the ground. 

Section 1056.— DAMAGES FOR TRESPASS ON MIN- 
ING CLAIM. — One v/ho unintentionally, and in the honest 
belief that he is lawfully exercising a right which he has, 
enters upon the mining property of another and removes 



MINIvS AND MINING. 531) 

his ore, is liable in damages for its value, and for no more. 
He may limit the recovery of the owner by deducting 
from the value of the ore at the mouth of the shaft the cost 
of mining and transporting it to that point. But one who 
wilfully and intentionally takes ores from the land of an- 
other is liable to him for the full value of the property taken, 
at the time of his conversion of it, without any deduction 
for the labor bestowed or expense incurred in removing it 
and preparing it for the market. 

Section 1057.— STATE HOMESTEAD ON MINING 
CLAIM. — The locator of a mining claim may, under the 
State law, declare a homestead upon it, if he is living on 
it ; and when that is done it has all the characteristics of 
a homestead declared upon any other character of land ; 
subject, however, to the holder complying with the require- 
ments of the law relating to the holding of mining claims 
until issue of patent from the United States Government. 
(Decided by the Supreme Court of California in the case 
of Gaylord vs. Place, which decision is printed in Volume 
98 of the California Reports, page 472.) 

Section 1058.— SCHOOL LANDS.— The law of Congress 
granting certain agricultural lands to the State of Califor- 
nia for school purposes, and providing that mineral lands 
shall not be subdivided into sections, public lands belong- 
ing to the State under said Act, if agricultural, which the 
proper United States officials have platted into a section 
and classified as agricultural lands, and concerning which 
the Receiver of the public land office has certified that the 
State's title thereto under said Act is free from adverse 
claims, are not, after their disposal by the State, subject 
to re-entry as mineral lands; the determination of the 
United States officials that the lands were agricultural 
being conclusive against a collateral attack. (Decided by 



540 BUSINESS LAWS FOR BUSINESS MEN. 

the Supreme Court of California in the case of Saunders 
vs. La Purisima Gold Mining Co., which decision is printed 
in Volume 125 of the California Reports, page 159.) 

Section 1059.— AUTHORITY OF MINE SUPERIN- 
TENDENTS TO PURCHASE SUPPLIES.— Mine Super- 
intendents, by virtue of their position, have authority to 
purchase all supplies necessary for the operation of the 
mine, and when they do so the owners will be boimd to 
pay for them. In one case it was held by our Supreme 
Court that the owner of the mine was bound to pay for 
provisions ordered b}^ the Superintendent for a boarding- 
house at which the miners lived, and the Court said : ''The 
record discloses the fact that it was absolutely necessary 
that provisions should be furnished this boarding-house, 
in order that the mine might continue in operation ; and it 
would seem that, aside from any express authority from 
the defendant to purchase these articles, and regardless of 
the question of ostensible agency, the respective Superin- 
tendents of the mine, by virtue of their positions alone, 
had the power to bind the defendant for the payment of 
these goods." (Decided by the Supreme Court of Californiai 
in the case of Heald vs. Hendy,. which decision is printed 
in Volume 89 of the California Reports, page 632.) 

Section 1060.— HYDRAULIC MINING.— Hydraulic 

mining, as the term is used in the laws of California, is 
mining by means of the application of water, under pressure, 
through a nozzle, against a natural bank. It may be car- 
ried on in this State v/herever and whenever it can be done 
without material injury to the navigable streams, or the 
lands adjacent thereto. 

Civil Code, Sections 1424, 1425. 

Section 1061.— TAILINGS AND DEBRIS.— No person 
or corporation has the right to cover his neighbor's land 
with debris from mine or mill, nor to permit any of the 



MINES AND MINING. 541 

tailings or refuse matter to Mow or be placed on the land 
of another. For the violation of another's right of use 
and possession, by flowing or covering his land with debris, 
or by causing his soil to wash or cave, the owner of the 
mine will be liable in damages, and the injury may be 
stopped by injunction. 

Section 1062.— CALIFORNIA DEBRIS COMMISSION. 

— The Congress of the United States passed an Act, in 
1893, creating a commission called the California Debris 
Commission. The purpose of the law^ was to provide a 
means for controlling the deposit of debris in the rivers 
and streams in that part of California constituting the San 
Joaquin and Sacramento watersheds. As enacted, after 
creating the California Debris Commission, it declares, for 
the purpose of the Act, "hydraulic mining" and "mining 
by hydraulic process" to have the meaning and application 
given to those terms in the State of California. The Act 
prohibits and declares unlawful such hydraulic mining 
"directly or indirectly injuring the navigability of said river 
systems, carried on in said territory, other than as per- 
mitted under its provisions." From these provisions it 
seems quite clear that its real intent and meaning is to 
prohibit and make unlawful any and all hydraulic mining 
in the territory drained by the Sacramento and San Joaquin 
river systems in the State of California, directly or indi- 
rectly injuring the navigability of said river systems ; and 
to permit it in all cases where the work can be prosecuted 
without such injury to the navigability of said river systems 
or to the lands adjacent thereto ; and that, in order to prop- 
erly determine the facts upon which the legislative will is 
to act, a skilled commission is created, whose duty it is to 
ascertam and determine what will or will not cause the 
prohibited injury, and to prescribe the character of im- 
pounding works, and the extent to which hydraulic mining 
in the territory described may be carried on without causing 
such injury. 



542 BUSINESS LAWS FOR busin:ess mkn. 

Section 1063.— MINING CORPORATIONS.— The Leg- 
islature of California has passed some laws which apply to 
mining corporations only. While the laws with reference 
to the organization, powers, and conduct of corporations 
generally apply to mining corporations as well as to others, 
yet there are some Acts of the Legislattire which were 
intended to apply specifically to mining corporations. 

(a) — Consolidation of Mining Corporations. — Two or 

more mining corporations owning claims lying in the same 
vicinity may consolidate upon terms agreed upon by the 
respective Boards of Directors or Trustees of such corpo- 
rations, provided the written consent of stockholders rep- 
resenting two-thirds of the capital stock of each company 
be obtained. Such consolidation does not relieve the re- 
spective companies or their stockholders of existing indebt- 
edness. In case of such consolidation, notice of the same 
must be given by advertising for at least one month in a 
newspaper in the county where the mining property is 
situated, and also in a newspaper published in the county 
where the principal place of business of any of such cor- 
porations shall be. When the consolidation is completed 
a certificate thereof, containing the manner and terms of 
the consolidation, must be filed in the office of the County 
Clerk of the county in which the original certificate of 
incorporation of any of said companies was filed, and a copy 
thereof must be filed in the office of the Secretary of State. 
Such certificate must be signed by a majority of each Board 
of Directors or Trustees of the original companies ; and 
they must within thirty days after the filing of such certifi- 
cate, and after at least ten days' public notice, call a meet- 
ing of the stockholders of all of said companies so consoli 
dated, to elect a Board of Trustees or Directors for the 
consolidated company for the ensuing year. The said cer- 
tificate must also contain all the matters required to b^ 
stated in Articles of Incorporation. 
Civil Code. Section 361. 



MINES AND MINING. 543 

(b) — Penalty for Issuing False Prospectus. — The officers 
of mining corporations, whose capital stock is listed at 
a stock board or stock exchange, or whose shares are regu- 
larly bought and sold in the stock market of California, 
are strictly prohibited from making or publishing any un- 
true or wilfully exaggerated report or prospectus of the 
condition of the company or mine. If any officer of a 
mining corporation is guilty of doing so, or signs, indorses, 
or verifies a false or wilfully exaggerated prospectus or 
report, published with intent to defraud the public or indi- 
viduals, the law declares him guilty of a felony, with pun- 
ishment fixed at imprisonment in the State Prison or a 
County Jail not exceeding two years, or by fine not exceed- 
ing $5,000, or by both such fine and imprisonment. 
Civil Code, 1897, page 762. 



(c) — Transfer of Stock in Mining Corporations. — The 

Civil Code of California, Sections 586, 587, makes the fol- 
lowing particular provisions about the transfer of stock 
in mining corporations : "Any corporation organized in this 
State for the purpose of mining or carrying on mining 
operations in or without this State, may establish and main- 
tain agencies in other States of the United States, for the 
transfer and issuing of their stock ; and a transfer or issue 
of the stock at any such transfer agency, in accordance 
with the provisions of its By-Laws, is valid and binding 
as fully and effectually for all purposes as if made upon 
the books of such corporation at its principal office within 
this State. The agencies must be governed by the By- 
Laws and the Directors of the corporation. All stock of 
such corporation, issued at a transfer agency, must be 
signed by the President and Secretary of the corporation, 
and countersigned at the time of its issue by the agent 
having charge of the transfer agency." 
Civil Code, Sections 586, 587. 



544 BUSINI]:SS LAWS FOR BUSINESS MEN. 

(d) — Sale, Lease, or Mortgage of Property. — The Direc- 
tors of a mining corporation cannot sell, lease, or mort- 
gage the whole or any part of the mining ground owned 
or held by the corporation, unless their act is authorized 
or ratified by the holders of at least two-thirds of the 
stock of the corporation. Such ratification may be made 
either in writing, signed and acknowledged by such stock- 
holders, or by resolution, properly passed at a regular 
called meeting of the stockholders. 

(e) — Purchase of Additional Mining Ground. — The Di- 
rectors of a mining corporation cannot purchase, or obtain 
in any way except by location, any additional mining 
ground, without the consent of the holders of two-thirds 
of the stock; but no one except a stockholder is permitted 
to object to any action of the Directors in this particular. 
Statutes of 1897, page 96. 

(f) — Removal of Officers. — On receiving a petition from 
the majority of the shareholders of a mining corporation, 
verified by the signers, the Superior Judge of the county 
in which the corporation has its principal place of business 
must, by publishing a notice in a newspaper, call a meet- 
ing of the shareholders. If at said meeting there are pres- 
ent the holders of a majority of the stock of the corporation, 
they shall organize by the selection of a Chairman and 
Secretary, and proceed to vote on the question of the re- 
moval of all or any of the officers of such corporation. If 
the holders of a majority of all the shares vote for the 
removal of any officer, or officers, the meeting shall proceed 
to ballot for officers to supply the vacancies. A verified 
report of the proceedings, in writing, shall be made by the 
Chairman and Secretary to the said Superior Judge, who 
shall thereupon issue to each person chosen a certificate 
of his election, and shall also issue an order requiring that 



i 



MINIMS AND MINING. 545 

all books, papers, and all property and effects be immedi- 
ately delivered to the officers elect, and thereafter the per- 
sons thus elected officers shall hold office until the next 
regular annual meeting. 

Statutes of 1871, page 443. 

(g) — Stock to be in Name of Real Owner or Trustee. — 
All stock in mining corporations in California must stand 
on their books in the names of the real owners or their 
Trustees ; and in every case where stock stands in the 
name of a Trustee, the party for whom he holds the stock 
in trust must be named in the books of the corporation, and 
also in the body of the certificate of stock. 
Statutes of 1897, page 96. 

(h)— When Books May Be Closed.— The books of a 
mining corporation cannot be closed more than two days 
prior to the day of any election. 

(i) — Inspection of Books. — Every mining corporation 
must keep a complete set of books, showing all receipts 
and expenditures, and for what paid or received, and also 
all transfers of stock. All of the corporation's books and 
papers must, at all times during business hours, be open 
to the inspection of any bona fide stockholder, and at the 
request of any stockholder it is the duty of the Secretary 
to attend at the office of the company at least one hour 
in the day outside of business hours, and show the books 
and papers. A stockholder desiring to see the books and 
papers of the company has the right to take an expert 
with him, to make an examination, and he is entitled to 
make copies of or extracts from any of the books or papers 
of the corporation. 

Statutes of 1873, page 866. 

(j) — Examination of Mine. — Any stockholder of a min- 
ing corporation has the right, at any reasonable hours, by 

35 



546 BUSINESS LAWS FOR busine:ss mkn. 

himself or together with an expert, to make an examination 
of the mining property, and every part thereof. When a 
stockholder makes application to the President, the latter 
must give him a written order to the Superintendent to 
show him the mine. The Superintendent must accompany 
the stockholder through the mine, or send some competent 
person with him, and afford him every facility for making 
a full and complete inspection. 

wStatutes of 1880, page 135. 

(k) — Penalty for Preventing Inspection. — If the Presi- 
dent refuses to issue an order to the Superintendent allow- 
ing a stockholder to inspect the mine, the corporation must 
pay to the stockholder $1,000 and traveling expenses to 
and from the mine. If the Superintendent refuses to obey 
the order of the President, the same damages are allowed 
the stockholder, and the Superintendent must be discharged 
from his employment. 

Statutes oi 1897, page 38. 

(1) — Itemized Account by Directors. — It is the duty of 
the Directors of a mining corporation to cause to be made, 
on the second Monday of each and every month, an item- 
ized account or balance sheet for the previous month, em- 
bracing a full and complete statement of all disbursements 
and receipts, showing from what sources such receipts were 
derived, and for what and to whom such disbursements 
or payments were made, and for what object or purpose the 
same were made ; also all indebtedness or liabilities incurred 
or existing at the time, and for what the same were incurred, 
and the balance of money, if any, on hand. Such account or 
balance sheet must be verified under oath by the President 
and Secretary, and posted in some conspicuous place in the 
office of the company. 

Statutes of 1897, page 38. 

(m) — Itemized Account by Superintendent. — It is the 



MiNIvS AND MINING. 547 

duty of the Superintendent, on the first Monday of each 
month, to file with the Secretary an itemized account veri- 
fied under oath, showing all receipts and disbursements 
made by him for the previous month, and for what said 
disbursements were made. Such account must also con- 
tain a verified statement showing the number of men em- 
ployed under him, and for what purpose, and the rate of 
wages paid to eacli one. He must attach to such account 
a full and complete report, under oath, of the work done 
in said mine, the amount of ore extracted, from wdiat part 
of mine taken, the amount sent to mill for reduction, its 
assay value, the amount of bullion received, the amount 
of bullion shipped to the office of the company or else- 
wdiere, and the amount, if any, retained by the Superin- 
tendent. It is also his duty to forward to the office of the 
company a full report, under oath, of all discoveries of ore 
or mineral-bearing quartz made in said mine, whether by 
boring, drifting, sinking, or otherwise, together with the 
assay value thereof. 

Statutes of 1897, page 38. 

(n) — What Must Be Done with Reports. — All accounts, 
reports, and correspondence from the Superintendent must 
be kept in some conspicuous place in the office of the 
company, and must be open to the inspection of all stock- 
holders ; ])K)vided, that this law applies only to mining 
corporations whose stock is listed and oiTered for sale at 
the public exchange, and does not apply to mining corpora- 
tions whose stock is not listed in the i)ublic exchange, and 
is not offered for public sale. 

Statutes )f 1897. page v3^- 

(o) — Mode of Escape from Underground Accident. — In 

any quartz mine where twelve men are employed, and on 
which there is sunk a perpendicular or incline shaft beyond 
a depth of 300 feet from the surface, the owner must pro- 
vide a second mode of egress from such mine by shaft or 



548 busine:ss laws for business mkn. 

tunnel, to connect with the main shaft at a depth of not 
less than lOO feet from the surface. 

(p) — Liability for Damages by Accident. — If he neglect 
to provide such second means of exit, then, in case of injury 
to a miner which he might have escaped had such second 
means of exit been provided, the owner is liable to such 
miner for all damages accruing by reason thereof, to be 
recovered in an action at law. And where death ensues 
from such injury, the heirs or relatives of the deceased may 
sue to recover the damages. 



PART IX 



WATER AND WATER RIGHTS 

Section 1064.— APPROPRIATION OF WATER.— The 

right to tlie use of running water, flowing in a river or 
stream, or down a canyon or ravine, may be acquired in 
CaHfornia by appropriation. Appropriation must be for 
some useful or beneficial purpose, and when the appropria- 
tor or his successor in interest ceases to use it for such 
purposes, the right ceases. 

Civil Code, Section 1410, 141 1. 

Section 1065.— NOTICE OF APPROPRIATION.— A 

person desiring to appropriate water must post a notice, in 
writing, in a conspicuous place at the point on the stream 
where he intends to take the water from it. This notice 
must state (i) that he claims the water there flowing to 
the extent of (giving the number) inches, measured under 
a four-foot 'pressure ; (2) the purpose for which he claims 
it, and the place of intended use; (3) the means by which 
he intends to divert it; (4) and the size of the flume, pipe, 
or aqueduct in which he intends to divert it from the stream. 
Statutes of 1903, page 361. 

Section 1066.— NOTICE MUST BE RECORDED.— A 

copy of the notice of appropriation must be recorded, within 
ten days after it is posted, in the offlce of the Recorder of 
the county in which it is posted. 

Statutes of 1903, page 361. 

(549) 



550 BUSINESS LAWS FOR BUSINESS MEN. 

Section 1067.— CHANGE OF PLACE OF INTENDED 
DIVERSION. — The law passed in 1903, above stated, pro- 
vides that after fiHng the notice of appropriation for rec- 
ord, "the place of intended diversion, or the place of in- 
tended use, or the means by which it is intended to divert 
the water, may be changed by the person posting said 
notice, or his assigns, if others are not injured by such 
change." But the law does not state in what manner the 
change shall be made, whether by posting and recording 
a new notice, or in some other way indicating the intention 
to change the place of diversion, the place of intended use, 
or the means of taking the water. The law bemg uncertain 
in this particular, it would be well to file a new notice for 
record stating the change. 

Statutes of 1903, page 361. 

Section 1068.— FORM OF NOTICE OF APPROPRIA- 
TION. — The following is a form of notice of appropriation, 
to be posted and recorded as stated in preceding Sections. 
The notice should be posted at the outlet or point of diver- 
sion on the bank of the stream : — 

Notice of Claim of Water. 

The undersigned claims the water running in this stream 

to the extent of (state numbei of inches) 

inches, measured under a four-foot pressure. 

I claim the water for 

(Here state purpose for which water is to be used.) 



and I intend to use it at 

(Here state place where water is to be used.) 

I intend to divert the water by means of 

(Here state whether it is intended to use a flume, pipe, ditch, 

or aqueduct.) 

The size of the flume (or ditch, or aqueduct, as the case 
may be) in which I intend to divert said water will be 



WATER AND WATER RIGHTS. 551 

(here state size.) 

Claimant. 
Notice posted i 19. • 

Section 1069.— WHEN WORK MUST BE COM- 
MENCED. — The law provides that work must be com- 
menced to take the water from the stream within sixty days 
after the notice is posted. The work must be prosecuted 
diligently and without interruption until completed, unless 
temporarily interrupted by snow or rain. By commence- 
ment of the work is meant excavation or construction of 
the ditch, fiume, pipe, or aqueduct, or the making of sur- 
veys, or the making of roads or trails, necessary in the 
inception of the enterprise. The law also provides that 
if the erection of a dam has been recommended by the 
California Debris Commission at or near the place where 
it is intended to divert water, the claimant will have sixty 
days after the completion of such dam in which to com- 
mence his own work. By "completion" is meant to con- 
duct the water to the place of intended use. 
Statute of 1903, l^age 396. 

Section 1070.— FORFEITURE OF CLAIM.— A failure 
to comply with the law, as to notices, commencement of 
work, or completion of the work by diligently prosecuting 
it. will forfeit the right of the claimant to the use of the 
water, as against a subsequent claimant who does comply 
with the law. 

Civil Code, Section 1419. 

Section 1071.— RIPARIAN RIGHTS.— The owner of 
land upon a stream has a right to the use of water, which 
is called a riparian right. He is entitled, without making 
an appropriation under the law, to have the use of water 
flowing by his land for any purpose to which it can be 
applied beneficially — for supplying his natural wants, in- 
cluding the use of the water for the domestic purposes of 



552 busine:ss laws for business mdn. 

his home or farm, such as drinking, washing, or cooking, 
and for his stock. This is what is called a riparian right, 
and the owner of land upon both navigable and unnavi- 
gable streams is called a riparian proprietor. As such, he 
is entitled to have the stream which washes his land flow 
in its natural channel, without diminution or alteration. It 
may be subject to condemnation for public use, but it can- 
not be condemned for public use without full compensation 
being made to the riparian proprietor for its loss. And 
he may insist, that the stream shall flow to his land in the 
usual quantity, at its natural place and height, and that it 
shall flow off his land to his neighbor below in its accus- 
tomed channel and at its usual level. His right to the 
use of the water is not a mere easement, but is inseparably 
annexed to the soil itself. It does not in any way depend 
upon appropriation, but is a part of the land, and goes 
with the land from owner to owner, as conveyances may 
be made. He may take the water from its natural chan- 
nel, and carry it on to other parts of his land, provided he 
turns it back into the channel again to his neighbor below. 
However, his use of the water must be reasonable, so as 
to let it flow on when he is through with it, so that others 
may also have the benefit of their riparian right in the use 
of the water, for the natural wants of other proprietors. 
He must see to it that the surplus, after he uses the water, 
is returned to the stream, for the use of those below. He 
is never allowed, as against a lower proprietor, to use all 
the water of the stream on his own land, unless such use 
is absolutely necessary for strictly domestic purposes and 
to furnish drink for man and beast. 

Section 1072.— PROTECTION OF RIPARIAN 
RIGHTS. — The courts of California will protect the ripa- 
rian proprietor, by issuing an injunction against any one 
who interferes with his proper use and enjoyment of the 
water. The courts will also allow him damages for injury 



WATER AND WATKR RIGHTS. 553 

to his premises, against any one who deprives him of his 
use of the water. 

Section 1073.— WATER RIGHTS ON PUBLIC LAND. 

— From the earHest times in CaHfornia it has been cus- 
tomary to divert water on the pubhc lands for mining, 
agricultural, and other purposes, and this right was, in 
1866, confirmed and approved by Act of Congress. There- 
fore, the occupant of public land who is living on it in 
good faith has the right, whether the land is surveyed or 
unsurveyed, to appropriate water flowing in a stream, can- 
yon, or ravine, and take it to his land for agricultural, 
mining, or domestic purposes. It will make no difference 
whether he has or has not obtained a legal title to the land 
he occupies. If he is an occupant of the land, claiming 
under the laws of the United States, this will be sufficient 
to entitle him to appropriate water for use on the land. 
(Decided by the Supreme Court of California in the case 
of Ely vs. Ferguson, which decision is printed in Volume 
91 of the California Reports, page 187.) 

Section 1074.— OBTAINING TITLE BY PRESCRIP- 
TION. — A right to the use of water may be obtained by 
prescription. That is, one who has been continuously 
using water, conveyed in a ditch, flume, or aqueduct, for 
five years, K:laiming the right as against the world, obtains 
a title to the water by reason of such possession adverse 
to others. 

Section 1075.— WATER FOR IRRIGATION.— Under 

the law of riparian rights, the riparian proprietor has the 
right to use a reasonable amount of the water of a stream 
running through his premises for irrigating his riparian 
land, but he has not the right for that purpose to take all 
the water which flows in the stream at the point where he 
diverts it. AVhat is a reasonable amount of water for irri- 
gation is a question that must depend upon the particular 



554 BUSINESS LAWS FOR BUSINESS MEN. 

circumstances of each case in which it arises, and it is a 
question which is frequently of difficult solution ; but it is 
settled in California that in no case can a riparian propri- 
etor, for the purpose of irrigation, use all the water of the 
stream, and thus leave a lower proprietor without any. 
And while he may use a part of the water of the stream 
to irrigate his land, the land irrigated must be riparian ; 
that is, the land irrigated must be the land through which 
the stream flows. He cannot take the water away to other 
land, although owned by him. He is restricted in the use 
of the water for irrigation to the land through which the 
stream flows. (Decided by the Supreme Court of Califor- 
nia in the case of Gould vs. Stafford, which decision is 
printed in Volume 91 of the California Reports, page 146.) 



Section 1076.— IRRIGATION DISTRICTS.— So urgent 
has been the need of water for irrigation in California, so 
vast the interests involved, the Legislature of the State has 
endeavored, from 1889 to 1897 particularly, to create a sys- 
tem of irrigation districts and a method of using the water 
for irrigation. The laws enacted have provided for the 
issuance and sale of bonds, and the expenditure of immense 
sums of money. But the practical working of all these 
laws has been attended by so many conflicting and intri- 
cate questions, the validity of bonds has been attacked so 
many times, and so much litigation has followed, that a 
statement of the law of California, as applied to irrigation 
districts, cannot be attempted in this book. For the law 
cannot be said to be definitely settled yet, as to rights, 
powers, or properties of irrigation districts, or as to the 
rights and privileges of individuals in relation to them. 
The various Acts of the Legislature of California on irri- 
gation districts may be found in the "General Laws of 
California," page 436. 



WATER AND WATlCR RIGHTS. 555 

Section 1077.— WATER FOR MINING.— The Statutes 
of the United States ])ro\i(le : "That whenever, hy priority 
of possession, rights to the use of water for mining" have 
accrued, and the same are recognized and acknowledged 
by the local customs, laws, and decisions of courts, the 
possessors and owners of such vested rights are pro- 
tected in tl"ie same, and the right of wa\' for the construc- 
tion of ditches and canals, they are hereby acknowledged 

and confirmed." 
« 

Revised Statutes of the United States, Section 233t,. 

(a) — The California Statute. — In California, the Legis- 
lature has provided by law that the owner of a mine is 
entitled to a right of way through or over other mines, 
for ditches, canals, or tunnels used in the working of his 
mine. He may therefore bring water to his mine in a ditch 
or flume over another mining claim, or, if necessary, in a 
tunnel through another mine. Of course, if by construct- 
ing a ditch, flume, or tunnel, to carry water to a mining 
claim, damage is done to other property over or through 
which it passes, the owner of the damaged property must 
be recompensed for his loss. 

Statutes of 1891, page 220. 

(b) — First Appropriator Has First Right. — The law 
about riparian rights does not apply to mining. For min- 
ing purposes, the first appropriator has first right. An 
appropriation of water for mining purposes is made in the 
same manner as an appropriation of water for other pur- 
poses, which has already been stated. 

(c) — Miner's Inch of Water. — The standard miner's inch 
of water, in California, is fixed by law as equivalent or 
equal to one and one-half cubic feet of water per minute, 
measured through any aperture or orifice. 
Statutes of 1901, page 660. 



556 busine:ss laws for businijvSS me:n. 

Section 1078.— SUBTERRANEAN WATERS— THE 
CASE OF KATZ VS. WALKINSHAW.— A novel and in- 
teresting question, involving immense individual and corpo- 
ration investments, has recently been before the Supreme 
Court of California, and received a final determination. It 
relates to subterranean waters, whether flowing in under- 
ground channels, or percolating through the earth and col- 
lecting in a given spot. The dispute occurred in San Bernar- 
dino County, and the case of Katz vs. Walkinshaw has now 
become celebrated in this State, deciding, as it does, that 
the right of a land-owner to take and use subterranean, per- 
colating waters, and divert the same from land of an ad- 
joining owner, is limited to a reasonable use in connection 
with the use of his own land, and does not authorize him 
to appropriate such waters by artesian wells and sell the 
water for the irrigation of distant lands, to the detriment 
of adjoining land-owners. The case has been in the Su- 
preme Court twice, the first decision being written by Judge 
Temple and the last by Judge Shaw. The Superior Court 
of San Bernardino County decided the case in favor of the 
defendant, who had sunk a well on his land, and thereby 
drew oflf the water from the well of his neighbor; but the 
Supreme Court reversed this decision and decided the case 
in favor of the plaintiff. The following extracts from the 
opinion prepared b}^ Judge Temple in the Supreme Court 
will give the interesting and very important points in- 
volved : — 

"The action was brought to enjoin defendant from drawing 
off and diverting water from an artesian belt, which is in 
part on or under the premises of plaintiffs, and to the water 
of which they have sunk wells, thereby causing the water 
to rise and flow upon the premises of plaintiffs and which 
had constantly so flowed for twenty years before the wrong 
complained of was committed by defendant. The water 
is necessary for domestic purposes and for irrigating the 
lands of plaintiffs, upon which there are growing trees, 



WATER AND WATER RIGHTS. 



557 



vines, shrubbery, and other plants, which are of great value 
to plaintiffs. 

''These facts are admitted, and further that defendant is 
diverting the water for sale, to be used on lands of others 
distant from the saturated belt from which the artesian 
water is derived. 

''The plaintiffs contend that this subsurface water consti- 
tutes an underground stream, and that plaintiffs are riparian 
thereto, and as such riparian owners they are seeking relief 
in this case. 

"The defendant denies that she is taking or diverting water 
from an underground stream or water-course, and alleges 
that all the water which rises, in the artesian wells on her 
premises, and w^hich she is selling, is percolating water, and 
is parcel of her premises, and her property. 

"In effect, therefore, while denying that she is doing anv 
act of which plaintiffs can complain, she really only denies 
that she is diverting water from an underground water- 
course, and asserts her right to dispose of the water in the 
manner alleged, because it is percolating water, not confined 
to a definite water-course. 

"The so-called artesian belt includes several square miles 
of territory. It is a large accumulation of earth upon the 
base of very high mountains, and is composed of detritus 
of varying quantity and material, with no regular stratifica- 
tion. Wells have been sunk at least to the depth of 750 
feet, but no bed-rock has been found. It has quite an in- 
cline from the mountain, and is from 700 to 1,500 feet above 
sea level. Air. F. C. Finkle, a civil engineer, was the chief 
witness for the plaintiffs, and testified both as to facts pal- 
pable to the senses, and as an expert. He says, the satu- 
rated land is fed : First, by the underflow from the numerous 
ravines, cauA^ons, and streams which enter the valley from 
the mountains ; and, secondly, by the rain and flood-water 
upon and absorbed upon the slope and between the artesian 
belt and the mountains. This water percolating down into 



558 BUSINESS LAWS FOR BUSINESS ME^N. 

the soil, and constantly pressed forward by water accumu- 
lating, finally gets under partially impervious earth, where 
it is held under sufficient pressure to create the artesian belt. 
The banks of this supposed sub-surface stream, the witness 
thought, were on the west, 'a cemented dyke which runs 
throughout the valley, and the eastern boundary of it is the 
clay bank or dyke at the south side of the Santa Ana River.' 
Within these limits many ravines enter from the mountains, 
some of them carrying at times great quantities of water, 
much of which had been appropriated and carried off in 
pipes or cemented aqueducts. 

'Tt is evident that if there is any flow to this underground 
body of water thus held under pressure, it is by percolation. 
The witness stated that the process was the same the world 
over. The lower lands are saturated from above. 'It is 
done by saturation from the rainfalls and the floods, and 
percolation through voids in the soil.' 

"It is cjuite manifest that this body (if it can be so styled) 
of percolating water cannot be called an underground water- 
course to which riparian rights can attach, unless we are 
prepared to abolish all distinction between percolating 
water and the water flowing in streams with known or 
ascertainable banks, which confine the water to definite 
channels. All rain water which falls upon the hills and 
mountain sides which does not flow off at once, as surface 
water, is absorbed and percolates down in the same way 
to the valley below. No doubt limits can be found to every 
such flow, as in this case. The distinction is well estab- 
lished and, in some respects, different rules of law applied 
to the two cases. The plaintiffs therefore cannot establish 
their claims upon the theory of an underground water- 
course to which they are riparian. 

"But the appellants contend that, though they are not 
riparian to an underground water-course, and although the 
saturated belt carries only percolating water, still they are 
entitled to the injunction prayed for. 

'Tt is obvious, at once, that the analogy between the right 



WATER AND WATER RIGHTS. 559 

to remove sand and gravel from the land for sale, and to 
remove and sell percolating water is not perfect. If we 
suppose a saturated plain, one may remove and sell the sand 
and gravel from his land without affecting or diminishing 
the sand and gravel on the lands of his neighbors. If the 
water on his lands is his property, then the water in the 
soil of his neighbors is their property. But when he drains 
out and sells the water on his land, he draws to his land and 
also sells water which is the property of his neighbor. And 
the eft"ect is similar in other respects. By pumping out the 
water from his lands he can, perhaps, deprive his neighbors 
of water for domestic uses, and, in fact, render their land 
valueless. In short, tlie members of the community, in the 
case supposed, have a common interest in the water. It is 
necessary for all, and it is an anomaly in the law if one per- 
son can for his individual profit destroy the community and 
render the neighborhood uninhabitable. 

"AA^e have derived our law, in respect to subterranean 
waters, as in other respects, mostly from England, but in 
regard to this matter the first cases are quite modern. Even 
yet the text-books on water rights have but little to say 
upon the subject of percolating water. Such law as has 
been made upon the subject comes from countries and cli- 
mates where water is abundant, and its conservation and 
economical use of little consequence as compared with a 
climate like Southern California. The learned counsel for 
appellants state in their brief, that water at San Bernardino 
is worth $1,000 per inch of flow. Percolating water or 
water held in the earth, is the main source of supply for 
domestic uses, and for irrigation, without which most lands 
are unproductive. It is also stated that speculators are 
seeking to appropri'ate the percolating water, by getting 
title to some part of a water shed or slope, and by running 
canals and tunnels, and by sinking, to obtain water for sale. 
It is asserted that the lands naturally made moist by per- 
colating water are very productive, and were first settled 
upon, and have been most highly improved ; and he asks 



560 BUSINESS LAWS I^OR BUSINESS MEN. 

whether these lands are to be converted into deserts, be- 
cause speculators may pump and carry away to some dis- 
tant locality the sub-surface waters which render the land 
fertile. Certainly no such case as this has come before a 
court, or could well exist, in England, or in the Eastern 
States. 

"No doubt the land proprietor owns the water which is 
parcel of his land, and may use it as he pleases, regard being 
had to the rights of others. It is not unreasonable that he 
should dig wells in order to have the fullest enjoyment and 
usefulness of his estate, or for pleasure, trade, or whatever 
else the land as land may serve. But to fit it up with wells 
and pumps of such persuasive and potential reach that from 
their base the defendant can tap the water stored in the 
plaintiff's land, and in all the region thereabout, and lead 
it to his own land, and by merchandising it prevent its re- 
turn, is, however reasonable it may appear to the defendant 
and its customers, unreasonable as to the plaintiff, and oth- 
ers whose lands are thus clandestinely sapped, and their 
value impaired. 

A rehearing was granted by the Supreme Court, and on 
November 28th, 1903, another and final decision was made 
by the full court, and the former opinion given by Judge 
Temple was approved and sustained in every particular. 
Upon the final determination of the suit. Judge Shaw pre- 
pared the opinion. It is extremely interesting and valu- 
able. Following are extracts showing the principal points 
in Judge Shaw's opinion : — 

''A rehearing was granted in this case for the purpose of 
considering more full}^, and by the aid of siich additional 
arguments as might be presented by persons not parties to 
the action, but vitally interested in the principle involved, 
a question that is novel and of the utmost importance to 
the application to useful purposes of the waters which may 
be found in the soil. 

''Petitions for rehearing were presented not only in behalf 



WATER AND WATER RIGHTS. 561 

of the defendant, but also on behalf of a number of corpora- 
tions engaged in the business of obtaining water from wells 
and distributing the same for public and private use within 
this State, and particularly in the southern part thereof. 
Able and exhaustive briefs have been filed on the rehear- 
ing. The principle decided by the late Justice Temple in 
the former opinion, and the course of reasoning by which 
he arrived at the conclusion, have been attacked in these 
several briefs and petitions with much learning and acumen. 
It is proper that we should here notice some of the objec- 
tions thus presented. 

"Many arguments, objections, and critic^'sms are pre- 
sented in opposition to the rules and reasoning of the for- 
mer opinion. It is contended that the rule that each land- 
owner owns absolutely the percolating waters in his land, 
wath the right to extract, sell, and dispose of them as he 
chooses, regardless of the results to his neighbor, is part 
of the common law, and as such has been adopted in this 
State. 

"The true doctrine is that the common law by its own 
principles adapts itself to varying conditions, and modifies 
its own rules so as to serve the ends of justice under the 
different circumstances, a principle adopted into our code 
by Section 3510, Civil Code: 'When the reason of a rule 
ceases, so should the rule itself.' Whenever it is found 
that, owing to the physical features and character of this 
State, and the peculiarities of its climate, soil, and produc- 
tions, the application of a given common law rule by our 
courts tends constantly to cause injustice and wrong, rather 
than the administration of justice and right, then the funda- 
mental principles of right and justice on which that law is 
founded, and which ito administration is intended to pro- 
mote, requires that a different rule should be adopted, one 
which is calculated to secure persons in their property and 
possessions, and to preserve for them the fruits of their 
labors and expenditures. The question whether or not the 
rule contended for is a part of the common law applicable 

36 



562 BUSIN:eSS LAWS I^OR BUSIN:eSS MEN. 

to this State, depends on whether it is suitable to our con- 
ditions under the rule just stated. 

"It is necessary, therefore, to state the conditions exist- 
ing in many parts of this State which are different from 
those existing where the rule had its origin. 

''In a large part of the State, and in almost all of the 
southern half of it, particularly south of the Tehachapi 
range of mountains, aside from grains, grasses, and some 
scant pasturage, there is practically no production by agri- 
culture, except by means of artificial irrigation. In a few 
places favored by nature, crops are nourished by natural 
irrigation, due to the existence underneath the ordinary 
soil of a saturated layer of sand or gravel, but these places 
are so few that they are of no consequence in any general 
view of the situation. Irrigation in these regions has al- 
ways been customary, and under the Spanish and Mexican 
governments it was fostered and encouraged. Even in 
the earlier periods of the settlement of the country, after 
its acquisition by the United States, and while the popula- 
tion was sparse and scattered compared to the present time, 
the natural supply of water from the surface streams, as 
diverted and applied by the crude and wasteful methods 
then used, was not considered more than was necessary. 
As the population increased, better methods of diversion, 
distribution, and application were adopted, and the streams 
were made to irrigate a very much larger area of land. 
While this process was going on, a series of wet years 
augmented the streams, and still more land was put under 
the irrigating systems. Recently there has followed an- 
other series of very dry years, which has correspondingly 
diminished the flow of the streams. After this period be- 
gan, it was soon found that the natural streams were insuf- 
ficient. The situation became critical, and heavy loss and 
destruction from drouth were imminent. Still the popu- 
lation continued to increase, and with it the demand for 
more water to irrigate more land. Recourse was then had 
to the underground waters. Tunnels were constructed, 



VVATKR AND WATER RIGHTS. 563 

more artesian wells bored, and finally pumps driven by 
electric or steam power were put into general use to obtain 
sufficient water to keep alive and productive the valuable 
orchards planted at the time when water was supposed to 
be more abundant. The geological history and formation 
of the country is peculiar. Deep borings have shown that 
almost all of the valleys and other places where water is 
found abundantly in percolation were formerly deep can- 
yons or basins, at the bottoms of which anciently there were 
surface streams or lakes. Gravel, boulders, and, occasion- 
ally, pieces of driftw^ood have been found near the coast 
far below tide level, showing that these sunken stream-beds 
were once high enough to discharge water by gravity into 
the sea. These valleys and basins are bordered by high 
mountains, upon which there falls the more abundant rain. 
The deep canyons or basins in course of ages have become 
filled with the washings from the mountains, largely com- 
posed of sand and gravel, and into this porous material the 
water now running down from the mountains rapidly sinks 
and slowly moves through the lands by the process usually 
termed percolation, forming what are practically • under- 
ground reservoirs. It is the Avater thus held or stored that 
is now being taken to eke out the supply from the natural 
streams. In almost every instance of a water supply from 
the so-called percolating water, the location of the well or 
tunnel by wdiich it is collected is in one of these ancient 
canyons or lake basins. Outside of these, there is no per- 
colating water in sufficient quantity to be of much impor- 
tance in the development of the country, or of sufficient 
value to cause serious litigation. It is usual to speak of the 
extraction of this water from the ground as a development 
of a hitherto unused supply. But it is not yet demon- 
strated that the process is not in fact, for the most part, 
an exhaustion of the underground sources from which the 
surface streams and other supplies previously used have 
been fed and supported. In some cases this has been 
proven by the event. The danger of exhaustion in this 



564 BUSINESS LAWS FOR BUSINESS MEN. 

way threatens surface streams as well as underground per- 
colations and reservoirs. Many water companies, antici- 
pating such an attack on their water supply, have felt com- 
pelled to purchase, and have purchased, at great expense, 
the lands immediately surrounding the stream or source 
of supply, in order to be able to protect and secure the 
percolations from which the source was fed. Owing to 
the uncertainty in the law, and the absence of legal pro- 
tection, there has been no security in titles to water rights. 
So great is the scarcity of water under the present demands 
and conditions that one who is deprived of water which 
he has been using has usually no other source at hand from 
which he can obtain another supply. 

"The water thus obtained from all these sources is now 
used with the utmost economy, and is devoted to the pro- 
duction of citrus and other extremely valuable orchard and 
vineyard crops. The water itself, owing to the tremendous 
need, the valuable results from its application, and the 
constant effort to plant more orchards and vineyards to 
share in the great profits realized therefrom, has become 
very valuable. In some instances it has been known to 
sell at the rate of fifty thousand dollars for a stream flowing 
at the rate of one cubic foot per second. Notwithstanding 
the great drain on the water supply, the economy in the 
distribution and application, and the much larger area of 
land thereby brought under irrigation, there still remain 
large areas of rich soil which are dry and waste for want 
of water. This abundance of land, with the scarcity and 
high price of water, furnishes a constant stimulus to the 
further exhaustion of the limited amount of underground 
water," and a constant temptation to invade sources already 
appropriated. The charms of the climate have drawn, and 
will continue to draw, immigrants from the better classes 
of the Eastern States, composed largely of men of experi- 
ence and means, energetic, enterprising, and resourceful. 
With an increasing population of this character, it is mani- 
fest that nothing that is possible to be done to secure sue- 



\\ATKR AND WATER RIGHTS. 565 

cess win be left undone, and that there must ensue in years 
to come a fierce strife, first to acquire and then to hold 
every available supply of water. 

"It is scarcely necessary to state the conditions existing 
in other countries referred to, to show that they are vastly 
different from those above stated. There the rainfall is 
abundant, and water, instead of being of almost priceless 
value, is a substance that in many instances is to be gotten 
rid of rather than preserved. Drainage is there an impor- 
tant process in the development of the productive capacity 
of the land, and irrigation is unknown. The lands that 
from their situation in this country are classed as damp 
lands would in those countries be either covered by lakes 
or would be swamps and bogs. If one is deprived of water 
in those regions, there is usually little difficulty in obtain- 
ing a sufficient supply nearby, and at small expense. The 
country is interlaced with streams of all sizes, from the 
smallest brooklet up to large, navigable rivers, and the ques- 
tion of the water supply has but little to do with the prog- 
ress or prosperity of the country. 

"It is clear also that the difficulties arising from the scarc- 
ity of water in this country are by no means ended, but, on 
the contrary, are probably just beginning. The application 
of the rule contended for by the defendants will tend to ag- 
gravate these difficulties rather than solve them. Traced 
to its true foundation, the rule contended for is simply this : 
'that owing to the difficulties the courts will meet in secur- 
ing persons from the infliction of great wrong and injustice 
by the diversion of percolating water if any property right 
in such water is recognized, the task must be abandoned 
as impossible, and those who have valuable property ac- 
quired by and dependent on the use of such water must be 
left to their own resources to secure protection for their 
property from the attacks of their more powerful neighbors, 
and, failing in this, must suffer irretrievable loss ; that might 
is the only protection. 



566 busine:ss laws for business men. 

" ' "The good old rule 
Sufficeth them, the simple plan, 
That they should take who have the power, 
And they should keep who can." ' 

" 'The field is open for exploitation to every man who 
covets the possessions of another, or the water which sus- 
tains and preserves them, and he is at liberty to take that 
water if he has the means to do so, and no law will prevent 
or interfere with him, or preserve his victim from the at- 
tack.' THE DIFFICULTIES TO BE ENCOUNTERED 
MUST BE INSURMOUNTABLE TO JUSTIFY THE 
ADOPTION OR CONTINUANCE OF A RULE 
WHICH BRINGS ABOUT SUCH CONSEQUENCES. 

"We do not see how the doctrine contended for by de- 
fendant could ever become a rule of property of any value. 
Its distinctive feature is the proposition that no property 
rights exist in such waters except while they remain in the 
soil of the land-owner ; that he has no right either to have 
them continue to pass into his land as they would under 
natural conditions, or to prevent them from being drawn 
out of his land by an interference with natural conditions 
on neighboring land. 

"It is apparent that the parties who have asked for a 
reconsideration of this case, and other persons of the same 
class, if the ride for which they contend is the law, or no- 
law, of the land, will be constantly threatened wdth danger 
of utter destruction of the valuable enterprises and systems 
of water works which they control, and that all new enter- 
prises of the same sort will be subject to the same peril. 
They will have absolutely no protection in law against oth- 
ers having stronger pumps, deeper wells, or a more favor- 
able situation, who can thereby take from them unlimited 
quantities of the water, reaching to the entire supply, and 
without regard to the place of use. We cannot perceive 
how a doctrine offering so little protection to the invest- 
ments in and product of such enterprises, and offering so 
much temptation to others to capture the water on wdiich 



WATER AND WATER RIGHTS. 5C7 

they depend, can tend to promote developments in the 
future or preserve those already made, and, therefore, we 
do not believe that public policy or a regard for the general 
welfare demands the doctrine. An ordinary difference in 
the conditions would scarcely justify the refusal to adopt 
a rule of the common law, or one which has been so gen- 
erally supposed to exist; but where the differences are so 
radical as in this case, and would tend to cause so great a 
subversion of justice, a different rule is imperative. 

''The doctrine of reasonable use, on the other hand, af- 
fords some measure of protection to property now existing, 
and greater justification for the attempt to make new de- 
velopments. It limits the right of others to such amount 
of water as may be necessar}^ for some useful purpose in 
connection with the land from which it is taken. If, as is 
claimed in the argument, such water-bearing land is gen- 
erally worthless except for the water which it contains, then 
the quantity that could be used on the land would be nom- 
inal, and injunctions could not be obtained, or substantial 
damages awarded, against those who carry it to distant 
lands. So far as the active interference of others is con- 
cerned, therefore, the danger to such undertakings is much 
less, and the incentive to development much greater, from 
the doctrine of reasonable use than from the contrary rule. 
No doubt there w^ill be inconvenience from attacks on the 
title to waters appropriated for use on distant lands made 
by persons Avho claim the right to the reasonable use of 
such waters on their own lands. Similar difficulties have 
arisen and now exist with respect to rights in surface 
streams, and must always be expected to attend claim.s to 
rights in a substance so movable ^s water. But the courts 
can protect this particular species of property in water as 
effectually as water rights of any other description. 

'Tt may, indeed, become necessary to make new appli- 
cations of old principles to the new conditions ; and in view 
of the novelty of the doctrine, and the scope of the argu- 
ment, it is not out of place to indicate to some extent how 



568 busine:ss laws for business men. 

it should be done, although otherwise it would not be nec- 
essary to the decision of the case. The controversies aris- 
ing will naturally divide into classes. 

"There will be disputes between persons or corporations 
claiming rights to take such w^aters from the same strata or 
source for use on distant lands. There is no statute on this 
subject, as there now is concerning appropriations of sur- 
face streams, but the case is not without precedent. When 
the pioneers of 1849 reached this State, they found no 
laws in force governing rights to take waters from surface 
streams for use on non-riparian lands. Yet it was found 
that the principles of the common law, although not pre- 
viously applied to such cases, could be adapted thereto, and 
were sufficient to define and protect such rights under the 
new conditions. The same condition existed with respect 
to rights to mine on public land, and a similar solution 
was found. The principles which, before the adoption of 
the Civil Code, were applied to protect appropriations and 
possessory rights in visible streams will, in general, be 
found applicable to such appropriations of percolating 
waters, either for public or private use, and will suffice for 
their protection as against other appropriators. Such 
rights are usufructuary only, and the first taker who with 
diligence puts the water in use will have the better right. 
And in ordinary cases of this character the law of pre- 
scriptive titles and rights and the statute of limitations will 
apply. 

''In controversies between an appropriator for use on dis- 
tant land and those who own land overlying the water- 
bearing strata, there may be two classes of such land- 
owners : those who have used the water on their land before 
the attempt to appropriate, and those who have not pre- 
viously used it, but who claim the right afterwards to do 
so. Under the decision in this case the rights of the first 
class of land-owners are paramount to that of one who 
takes the water to distant land ; but the land-owner's right 
extends only to the quantity of water that is necessary for 



WATER AND WATER RIGHTS. 569 

use on his land, and the appropriator may take the surplus. 
As to those land-owners who begin the use after the appro- 
priation, and who, in order to obtain the water must re- 
strict, or restrain, the diversion to distant lands or places, 
it is perhaps best not to state a positive rule. Such rights 
are limited at most to the quantity necessary for use, and 
the disputes will not be so serious as those between rival 
appropriators. 

''Disputes between overlying land-owners, concerning 
water for use on the land, to which they have an equal 
right, in cases where the supply is insufficient for all, are 
to be settled by giving to each a fair and just proportion. 
And here again we leave for future settlement the question 
as to the priority of rights between such owners who begin 
the use of the waters at different times. The parties in- 
terested in the question are not before us. 

"In addition there are some general rules to be applied. 
In cases involving any class of rights in such waters, pre- 
liminary injunctions must be granted, if at all, only upon 
the clearest showing that there is imminent danger of 
irreparable and substantial injury, and that the diversion 
complained of is the real cause. Where the complainant 
has stood by while the development was made for public 
use, and has suffered it to proceed at large expense to suc- 
cessful operation, having reasonable cause to believe it 
would affect his own water supply, the injunction should 
be refused and the party left to his action for such damages 
as he can prove. If a party makes no use of the water on 
his own land, or elsewhere, he should not be allowed to 
enjoin its use by another who draws it out, or intercepts 
it, or to whom it may go by percolation, although, perhaps, 
he may have the right to a decree settling his right to use 
it when necessary on his own land, if a proper case is made. 

''The objection that this rule of correlative rights will 
throw upon the court a duty impossible of performance, 
that of apportioning an insufficient supply of water among 
a large number of users, is largely conjectural. No doubt 



570 BUSINESS LAWS FOR BUSINESS MEN. 

cases can be imagined where the task would be extremely 
difficult, but if the rule is the only just one, as we think 
has been shown, the difficulty in its application in extreme 
cases is not a sufficient reason for abandoning it and leaving 
property without any protection from the law. 

"It does not necessarily follow that a rule for the govern- 
ment of rights in percolating water must also be followed 
as to underground seepages or percolations of mineral oil. 
Oil is not extracted for use in agriculture, or upon the land 
from which it is taken, but solely for sale as an article of 
merchandise, and for use in commerce and manufactures. 
The conditions under which oil is found and taken from 
the earth in this State are in no important particulars dif- 
ferent from those present in other countries where it is 
produced. There is no necessary parallel between the con- 
ditions respecting the use and development of water and 
those affecting the production of oil. Whether in a contest 
between two oil producers concerning the drawing out by 
one of the oil from under the land of the other we should 
follow the rule adopted by the courts of other oil-producing 
States, or apply a rule better calculated to protect oil not 
actually developed, is a question not before us and which 
need not be considered." (Decided by the Supreme Court 
of California in the case of Katz vs. Walkinshaw, wdiich 
decision is printed in Volume 26 of California Decisions, 
page 820.) 

Section 1079.— WATER COMPANIES.— Water com- 
panies are incorporated under the general laws applying 
to corporations in California, to supply cities and towns 
with water. The law provides, however, that no corpo- 
ration formed to supply any city and county, or city or 
tov/n, with water must do so unless previously authorized 
by an ordinance, or unless it is done under a contract ; 
that notwithstanding any such contract, the municipality 
shall retain the right to regulate the rate to be charged for 
water; that no exclusive right shall be granted to any 



WATER AND WATER RIGHTS. 571 

water company; and that no contract or franchise shall be 
made for a term exceeding fifty years. 
Civil Code, Section 548. 

(a) — Water in Case of Fire. — The means of extinguish- 
ing fires in a city or town, the fire apparatus and the fire 
company, are under the direction and control of the munici- 
pality. And a water company, as a condition of the privi- 
lege granted to it to supply the inhabitants with water, 
must supply the municipality with water to the extent of 
its means in case of fire, free of charge. 
Civil Code, Section 545. 

(b) — Water Rates. — The Board of Supervisors of a city 
and county, or the Board of Trustees of a city or town, 
are compelled to annually fix the rates to be charged and 
collected by any water company supplying water to the 
inhabitants or the municipality. The rates thus fixed hold 
good for one year. 

General Laws of California, page 1268. 

(c) — Duty to Furnish Water. — All corporations formed 
to supply water to cities or towns must furnish pure, fresh 
water to all tiie inhabitants for domestic purposes, so long 
as the supply permits, at reasonable rates, and without dis- 
tinction of persons, upon proper demand therefor. If a 
water company refuses to supply an inhabitant of a town 
with water, upon demand and tender of the charge, the 
company may be compelled to do so, by a suit in the Su- 
perior Court. 

Civil Code', Section 549. 

(d) — Water Company Not Liable for Loss by Fire. — A 

very important decision was made by the Supreme Court 
of California, in February, 1904, the first case of the kind 
in the United States. A fire occurred in the towm of Ukiah, 



572 BUSINESS LAWS P'OR BUSINi:SS ME^N. 

and at the time, through the neghgence of the water com- 
pany, there was not sufficient water in the mains to extin- 
guish it, or to keep it from spreading. A part of the Town 
Hall and other city property was destroyed. The town 
sued the water company for damages. On appeal to the 
Supreme Court, the decision was in favor of the water 
company, the Court holding that where a water company 
furnishes water to a municipality for general fire purposes, 
it cannot be held liable for the value of property destroyed 
by fire, although the loss may be due to the negligence of 
the company. A Avater company is not an insurer against 
loss by fire. To be liable at all, in any event, for loss of 
property by fire, there would have to be an express con- 
tract between the owner and the company by which the 
latter agreed to pay for certain property, if destroyed by 
fire through its failure to supply w^ater. A franchise to 
supply water for general fire purposes does not create such 
contract, and a water company is not liable in California 
for loss by fire. (Decided by the Supreme Court of Cali- 
fornia in the case of Town of Ukiah vs. Ukiah Water and 
Improvement Company, which decision is printed in Vol- 
ume 2.^ of California Decisions, page 353.) 

(e) — Water Rates Must Be Reasonable. — The rates fixed 
annually must be reasonable, sufficient in amount to afford 
the water company a fair and just compensation for the 
services rendered by it in furnishing water to the city and 
its inhabitants. But in making an estimate of what will 
be a fair rate, the city cannot include interest on the com- 
pany's indebtedness, nor the sum the plant will depreciate 
annually aside from the sum requisite for its maintenance 
and repairs. (Decided by the Supreme Court of California 
in the case of Redlands Domestic Water Co. vs. City of 
Redlands, which decision is printed in Volume 121 of the 
California Reports, page 365.) 



WATER AND WATKR RIGHTS. 578 

(f) — Damages for Failure to Supply Water. — In an ac- 
tion for the failure of a water company to furnish plaintiff 
with water, plaintiff cannot recover the profits he would 
have realized from crops that he would have raised had 
the water been furnished by defendant, less the cost of 
planting, etc., as such profits are too remote and speculative ; 
but the proper damages are the difference between the 
rental value of the land with water and its rental value 
without it. (Decided by the Supreme Court of California 
in the case of Crow vs. \San Joaquin Canal Co.. w^hich 
decision is printed in Volume 130 of the California Reports, 
page 309.) 

(g) — Duty to Fix Reasonable Rates Can Be Compelled. 

Where a city Board have arbitrarily, without investiga- 
tion, and without any exercise of judgment or discretion, 
fixed water rates, without any reference to what they 
should be, without reference either to the expense neces- 
sary to furnish water or to what is a fair and reasonable 
compensation therefor, so as to render it impossible to 
furnish water Avithout loss, and so low as to amount to a 
practical confiscation of the property invested in the busi- 
ness, it is within the jurisdiction of a court of equity to 
set aside such ordinance and direct the Board to fix fair 
and reasona'ble rates. (Decided by the Supreme Court of 
California in the case of Spring Valley Water Works vs. 
City and County of San Francisco, which decision is printed 
in Volume 82 of the California Reports, page 286.) 

(h) — Pollution of Water. — The courts will interfere to 
prevent the pollution of the waters of a stream, from de- 
posits of offensive matter. For instance, where there are 
lower riparian owners, one has no right to pollute the 
waters of a stream by maintaining a cow stable and hog 
pen on its banks, but must keep his stock at a reasonable 
distance away from the stream. (Decided by the Supreme 
Court of California in the case of People vs. Elk River 



574 BUSINESS LAWS I^OR BUSINESS MEN. 

Mill Co., which decision is printed in Volume 107 of the 
California Reports, page 221.) 

Section 1080.— CONDEMNATION OF WATER FOR 
PUBLIC USE. — The riparian owner's property in the 
water of a stream may be condemned for public use ; as, 
to supply the inhabitants of a city or town. But upon any 
such condemnation, which is by a suit in the Superior 
Court, the judgment will direct the payment to the owner 
of the value of the water to him, and such damages as he 
may sustain from being deprived of the water. This is 
done as a compensation to him for the loss of his riparian 
rights. The amount of damages which will justly com- 
pensate for the taking of the water for public use will be 
determined in each case by a jury selected for the purpose. 



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